UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]For the transition period from
..................................... to .............................
Commission file number 0-15609
Agouron Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
California 33-0061928
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10350 North Torrey Pines Road, La Jolla, California 92037-1020
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (619) 622-3000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, without par value
(Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
-----
On August 15, 1997, the aggregate market value of the voting stock held by
nonaffiliates totaled approximately $1,372,842,000 based on the closing stock
price as reported by The Nasdaq Stock Market. On August 15, 1997, there were
approximately 15,015,000 shares of common stock, without par value, of the
registrant issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's definitive proxy statement to be prepared pursuant to
Regulation 14A and filed in connection with solicitation of proxies for its
Annual Meeting of Stockholders, to be held on November 6, 1997, is incorporated
by reference into Part III of this Form 10-K.
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PART I
Item 1. BUSINESS
Except for the historical information contained herein, the following
"Business" section contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed here. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in the "Business" section and
Exhibit 99 to this Form 10-K. General
The Company was organized and incorporated in California in June 1984.
Agouron is an integrated pharmaceutical company committed to the discovery,
development, manufacturing and marketing of small-molecule drugs engineered to
inactivate proteins which play key roles in cancer, AIDS and other serious
diseases. The Company is currently marketing its first drug, VIRACEPT(R)
(nelfinavir mesylate) for treatment of HIV infection. In addition, the Company
is conducting phase II/III clinical trials for a second drug, THYMITAQ(TM)
(nolatrexed dihydrochloride, formerly known as AG337), for treatment of solid
malignant tumors. Further, the Company has 18 programs in progress for discovery
or development of other new drugs in the fields of cancer, viral disease,
inflammatory disease and other serious diseases. Seven of these preclinical
programs are being pursued by Alanex Corporation ("Alanex"), a wholly-owned
subsidiary of Agouron. The Company's business currently consists of one business
segment, the operations of which are described below.
Agouron's goal is to generate increasing profitability from the sale of
drugs generated principally from its own drug discovery and development efforts.
To augment its technical capabilities, to enhance the likelihood of successful
commercialization of its products and to offset some of its operating costs, the
Company has entered into collaborative research and development arrangements
with other companies. Consistent with this commercial goal, the Company has
generally retained significant commercial rights in drugs developed in its
collaborative research and development programs funded in whole or in part by
other companies. The Company anticipates that its successfully developed
products will be commercialized both through its own direct sales and marketing
activities in certain pharmaceutical markets and through manufacturing and
marketing relationships with other pharmaceutical companies.
The Company's common stock account has evolved through a series of public
offerings and private placements of its equity securities and the exercise of
various warrants and employee stock options. Five public offerings (calendar
1987, 1989, 1991, 1995 and 1996) generated net proceeds of approximately
$211,600,000 and the issuance of approximately 9,894,000 shares. The most recent
public offering raised approximately $77,245,000 through the issuance of
2,735,000 shares. Private placements have generated approximately $17,100,000 in
net proceeds and the issuance of approximately 2,782,000 shares. The exercise of
warrants and employee stock options (including employee stock purchase plan
transactions) have generated proceeds of approximately $15,300,000 and the
issuance of approximately 1,317,000 shares. In 1997, the Company acquired Alanex
in a purchase transaction through the issuance of approximately 722,000 shares
of the Company's common stock valued at approximately $61,000,000. The
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Company also recorded in its financial statements a $12,100,000 increase to
common stock which reflects the anticipated tax benefit of stock options which
have been exercised through fiscal 1997.
Narrative Description of Business
Agouron is developing innovative drugs for treatment of cancer, HIV
infection and other serious diseases and has expended approximately $299,000,000
on research and development since its inception, excluding a $57,500,000
write-off for in-process technology purchased in 1997 in the acquisition of
Alanex.
VIRACEPT
In March 1997, the Company received clearance from the Food and Drug
Administration ("FDA") to market its first drug, VIRACEPT, a potent HIV protease
inhibitor that substantially decreases viral load and increases CD4+T cell
counts, when used in combination drug therapy. The orally administered product
is available in adult and pediatric formulations. Protease inhibitors are a
relatively new class of drugs.
Currently, according to the International AIDS Society, combination
antiretroviral drug therapy, including a potent protease inhibitor, such as
VIRACEPT, is recommended for HIV-infected individuals with plasma HIV RNA
greater than 5,000-10,000 copies/mL.
Agouron has developed VIRACEPT in collaboration with the pharmaceutical
division of Japan Tobacco Inc. ("JT"). Agouron and JT have granted exclusive
commercial rights in Europe, Asia and certain other countries in the world to
Hoffmann-La Roche Inc. and F. Hoffmann-La Roche Ltd ("Roche"). The Company and
JT will share profits and/or royalties equally from the worldwide
commercialization of VIRACEPT.
The Company's fiscal 1997 operating results were significantly impacted by
the clinical development and commercialization of VIRACEPT, resulting in
increased costs and revenues. VIRACEPT sales since its launch in March 1997
totaled $56,969,000 for the fiscal year ended June 30, 1997. Published data from
industry surveys indicate that the demand for VIRACEPT has continued to increase
steadily since its introduction in March 1997. The Company estimates that 35,000
patients were taking VIRACEPT at the end of June 1997. It is anticipated that
continued increasing VIRACEPT sales will make a substantial contribution toward
the achievement by the Company of profitable financial results in fiscal 1998
and beyond.
THYMITAQ
THYMITAQ, an inhibitor of the enzyme thymidylate synthase, is presently the
subject of phase II/III clinical studies evaluating an intravenous formulation
of the drug as a chemotherapeutic agent for the treatment of malignant solid
tumors associated with cancer of the head/neck and liver (hepatocellular
carcinoma). An oral formulation of THYMITAQ is also being developed by the
Company. If successful, the phase II/III pivotal clinical trials could lead to
submission of a New Drug Application ("NDA") for THYMITAQ in calendar 1998 or
calendar 1999. Agouron intends to engage in the sales and marketing of THYMITAQ
in North America upon its approval by the FDA.
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In June 1996, Agouron granted Roche worldwide development rights in two
anti-cancer drugs currently being developed by the Company and agreed to
collaborate with Roche on an additional early-stage anti-cancer drug discovery
program. In return for rights to the Company's most advanced anti-cancer drugs
(THYMITAQ and an earlier stage AG3340), Roche has paid $15,000,000 in initial
license fees and has agreed to pay milestone payments of up to $40,000,000 and
to bear 80% of the future development costs of these two drugs. In North
America, the Company and Roche will cooperatively market the two drugs and will
share equally in resulting profits. Outside of North America, Roche will lead
commercialization efforts and pay royalties to the Company or, in certain
circumstances, will share profits with the Company. For similar commercial
rights to compounds generated in a collaborative research program focused on
cyclin-dependent kinases (initially targeting the enzyme cdk4), Roche is to
provide annual research support to the Company of $3,000,000 for three years as
well as subsequent milestone payments of up to $20,000,000 and has agreed to
bear 80% of any post-research development costs.
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Research and Development Programs
Agouron's research and development programs primarily address the areas of
cancer, viral disease, inflammatory disease, pain and diabetes. Agouron's drug
discovery programs apply the Company's core technologies of three-dimensional
structure based drug design and high throughput screening of chemical libraries
generated by computation-directed combinatorial chemistry.
The following table outlines the status of the Company's portfolio of
research and development programs. Agouron is pursuing some of these programs
independently while others are being undertaken in collaboration with other
companies.
<TABLE>
<CAPTION>
Program Indication Development Stage Partner
- ------- ---------- ----------------- -------
<S> <C> <C> <C>
Cancer
THYMITAQ-i.v. Solid Tumors Phase II/III Roche
THYMITAQ-oral Solid Tumors Phase I Roche
AG2034 Solid Tumors Phase I None
AG3340 Metastasis Phase I Roche
AICART Solid Tumors Research None
cdk4 Solid Tumors Research Roche
VEGF Receptor Solid Tumors Research None
Viral Disease
VIRACEPT HIV Infection Approved JT
Rhinovirus Common Cold Research None
Cytomegalovirus CMV Infection Research JT
Herpes simplex virus Herpes Infection Research JT
Hepatitis C virus Viral Diseases Research JT
Inflammatory Disease
MMP Arthritis Phase I Roche
AICART Inflammation Research None
Pain
Opiate Agonist* Pain Preclinical Astra Pharma
Antagonist* Undisclosed Research Roche Bioscience
Diabetes
Antagonist* Undisclosed Research Novo Nordisk
Agonist* Undisclosed Research Novo Nordisk
Other
Neuropeptide Y Antagonist* Obesity and cardiovascular
disease Preclinical None
CRF Antagonist* Depression and Anxiety Preclinical None
GnRH Antagonist* Endometriosis and Sex Research None
Hormone-Dependent Tumors
</TABLE>
* Programs undertaken by Alanex
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Cancer
Overview
The development of new drugs for treatment of cancer is a primary
scientific and commercial focus of the Company. Cancer is the second leading
cause of death in the United States and most developed nations. While much
progress has been made in the treatment of certain forms of cancer, most
existing anti-cancer drugs display limited efficacy and significant toxicities
that restrict their clinical usefulness. As a result, there remains a critical
need for anti-cancer drugs which are less toxic and more efficacious either as
tumoricidal (tumor-killing) or tumoristatic (tumor-controlling) agents.
The Company's anti-cancer drug discovery and development programs are
targeting inhibitors of the following enzymes: thymidylate synthase ("TS");
glycinamide ribonucleotide formyltransferase ("GART"); matrix metalloproteases
("MMPs"); aminoimidazole carboxamide ribonucleotide formyltransferase
("AICART"); cyclin dependent kinase 4 ("cdk4"); and a receptor for vascular
endothelial growth factor ("VEGF"). Three of these enzyme targets (TS, GART and
AICART) have a common structural motif that permits lead inhibitors from one
program to be useful potentially in others.
TS Inhibitors: THYMITAQ
The enzyme TS catalyzes a critical step in the synthesis of DNA and is
especially crucial to cancer cells undergoing uncontrolled proliferation.
Agouron has focused on the design and development of TS inhibitors of novel
chemical character that may be capable of penetrating fatty membranes and
tissues, circumventing some of the more common forms of drug resistance and
passing into and out of cells by passive diffusion, allowing for greater
clinical control of toxicity and for a broader spectrum of anti-tumor activity.
Agouron's development compound in the TS program is THYMITAQ.
Pivotal phase II/III clinical trials are currently under way in the United
States, Canada, Europe, and Asia for evaluation of THYMITAQ as a single agent
treatment in cancer of the head/neck and in liver cancer. For treatment of
head/neck cancer, THYMITAQ is being compared to the chemotherapeutic agent
methotrexate in patients who have failed first-line therapy. For treatment of
liver cancer, THYMITAQ is being evaluated both in a non-comparative clinical
trial and in a clinical trial which compares THYMITAQ to the chemotherapeutic
agent doxorubicin. If successful, the pivotal trials could permit the Company to
file a NDA for THYMITAQ in calendar 1998 or calendar 1999.
THYMITAQ is currently being developed by Agouron in collaboration with
Roche. Under the terms of the collaboration, Roche will bear 80% of development
costs of THYMITAQ and will lead commercialization of the drug outside of North
America subject to payment of royalties to Agouron. Roche and Agouron will
co-promote THYMITAQ in North America and will share equally in profits derived
from North American sales of the drug.
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GART Inhibitors: AG2034
AG2034 is a potent, selective inhibitor of GART -- a key enzyme in the
biochemical pathway through which tumor cells synthesize purines, essential
components of DNA. With the exception of liver cells, all normal human tissues
obtain purines through an alternative pathway (the purine salvage pathway). The
Company believes that inhibitors of GART will show a high degree of selectivity
for tumor cells and less significant bone marrow toxicity than other
chemotherapeutic agents.
In fiscal 1997, Agouron began Phase I studies of AG2034 in the United
States and United Kingdom. To date, 27 patients have been enrolled in the two
studies. The Company presently retains all commercial rights to any compounds
resulting from this program.
MMP Inhibitors: AG3340
Independent research has shown MMPs to be involved in many disease states.
Certain MMPs have been associated with tumor growth, the metastasis of tumor
cells to secondary sites within the body and the growth of new blood vessels
(angiogenesis) through which tumor cells obtain nutrients and growth factors.
In fiscal 1997, Agouron completed a Phase I study of AG3340, a potent,
selective inhibitor of certain MMPs, in Edinburgh, Scotland. In this study,
healthy male volunteers received single and multiple doses of AG3340 between 10
mg and 200 mg in tablet form. The purpose of the study was to evaluate the
tolerability of the drug and to determine whether adequate blood concentrations
could be achieved following oral administration. AG3340 was well tolerated at
all dose levels studied. AG3340 was rapidly absorbed following oral
administration. Sustained blood concentrations were observed that were
substantially greater than those showing efficacy in animal cancer models.
In June 1997, Agouron received clearance from the FDA to begin Phase I
clinical studies of AG3340 in the United States. Under an Investigational New
Drug Application ("IND") submitted to the FDA in May 1997, the University of
Wisconsin Comprehensive Cancer Center in Madison, Wisconsin and The Vanderbilt
Clinic at Vanderbilt University in Nashville, Tennessee are proceeding with
extended, dose-escalation studies of AG3340 in patients with advanced cancer. If
successful, the completion of this study will position the Company to
investigate the safety and anti-cancer activity of AG3340 in longer-term Phase
II clinical trials.
AG3340 is currently being developed by Agouron in collaboration with Roche.
Under the terms of the collaboration, Roche will bear 80% of the development
costs of AG3340 and will lead commercialization of the drug outside of North
America subject to payment of royalties to Agouron. Roche and Agouron will
co-promote AG3340 in North America and will share equally in profits derived
from North American sales of the drug.
AICART Inhibitors
The enzyme AICART catalyzes a rate-determining step in the purine
biosynthetic pathway and represents a second target for anti-cancer drugs that
are active by virtue of their anti-purine
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effects. The Company's scientists have solved the three-dimensional molecular
structure of AICART and are engaged in design, synthesis and evaluation of
AICART inhibitors intended to be efficacious in the treatment of cancer. The
Company presently retains all commercial rights to any compounds resulting from
this program.
cdk4 Inhibitor
Cyclin-dependent kinases are enzymes that play roles in regulating the
transitions between phases in the life cycle of all cells. A member of this
family of enzymes known as cdk4 has been implicated by independent research in
driving cells from a quiescent phase to the highly proliferative phase
characteristic of malignancies - particularly in familial melanomas, esophageal
carcinomas and pancreatic cancers. Agouron is engaged in a drug discovery
program aimed at the design of selective small molecule drugs with the potential
to inhibit the activity of cdk4 and therefore block the transition of cancer
cells into their proliferative phase.
This program is being pursued in collaboration with Roche, which will pay
Agouron annual research funding for three years in support of the cdk4 program.
Commercial rights for all indications in compounds that are generated in the
program are similar to those held by Roche for the MMP inhibitor AG3340.
VEGF Receptor
The process known as angiogenesis, the formation of new blood vessels, is a
key factor in the maintenance and progression of several disease states
including the metastasis of malignant tumors. The ability of cancer cells to
carry out angiogenesis depends in part upon the activity of a protein known as
Vascular Endothelial Growth Factor ("VEGF") which, by binding to a receptor
known as kdr, triggers the growth of endothelial cells. Agouron is engaged in a
drug discovery program whose objective is the design of drugs that block the kdr
receptor for VEGF and, therefore, compromise the ability of tumors to carry out
a key process in angiogenesis. The Company presently retains all commercial
rights to any compounds resulting from this program.
Viral Disease
Overview
The development of new drugs for the treatment of certain viral diseases is
another scientific and commercial focus of the Company. The Company is presently
conducting programs aimed at discovery and/or development of four classes of
anti-viral drugs that block viral proteases, enzymes required by several
families of pathogenic viruses to carry out replication and infection. Agouron's
anti-viral drug programs include a HIV protease inhibitor (VIRACEPT), rhinovirus
3C protease inhibitors, herpes virus protease inhibitors, cytomegalovirus
inhibitors and hepatitis C protease inhibitors. Agouron is developing certain of
its anti-viral drugs in collaboration with JT.
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HIV Protease Inhibitor: VIRACEPT
HIV protease is an enzyme that performs an essential role in the infectious
cycle of HIV, and clinical research has demonstrated that inhibition of the
protease enzyme renders HIV unable to form new infectious virus. Today, four
FDA-approved HIV protease inhibitors (including VIRACEPT) are making a
significant contribution in the management of HIV disease.
VIRACEPT was cleared by the FDA for marketing in the United States in March
1997 pursuant to the FDA's guidelines for accelerated approval. VIRACEPT
development activities now include certain additional phase II/III studies to
facilitate the full approval of the drug and certain phase IV marketing studies
designed to expand the utilization of the product.
Rhinovirus 3C Protease Inhibitors
Rhinoviruses are believed to be the single most frequent cause of the
common cold. While rhinovirus infections are a periodic annoyance to most normal
individuals, they may produce more severe and prolonged symptoms in people with
chronic obstructive pulmonary disease, such as asthma and emphysema. All known
strains of rhinoviruses depend on a critical enzyme, the 3C protease, at several
stages of their life cycle for production of new infectious viruses.
Agouron-designed potent, selective rhinovirus 3C protease inhibitors currently
are being evaluated in preclinical pharmacological studies.
CMV and HSV-1 Protease Inhibitors
Among the most clinically significant members of the family of herpes
viruses are herpes simplex virus-1 ("HSV-1") and cytomegalovirus ("CMV"). Like
HIV and rhinoviruses, HSV-1 and CMV each contain a protease enzyme essential for
virus maturation and infection. Agouron scientists have solved the
three-dimensional molecular structure of the targeted protease enzyme from CMV
and are seeking to solve the HSV-1 protease in preparation for application of
Agouron's drug design technologies. However, no inhibitor of HSV-1 or CMV has
yet been selected by Agouron for development. The Company is pursuing this
research program in collaboration with JT.
Hepatitis C Protease Inhibitors
The hepatitis C virus ("HCV") is a virus that causes illness ranging from a
mild flu-like disease to progressive liver disease, cirrhosis and primary liver
cancer. The ability to treat infection by HCV represents a significant unmet
clinical need, particularly in Asian countries. HCV depends upon a key protease
enzyme for the production of new infectious virus.
During fiscal 1997, Agouron scientists solved the three-dimensional
molecular structure of the protease enzyme encoded by the human HCV. Solution of
the HCV protease structure has permitted the initiation of a program to design a
new class of anti-viral drugs that block the HCV protease and disrupt the HCV
life cycle. However, no inhibitor of HCV has yet been selected by Agouron for
development. The Company is pursuing this research program in collaboration with
JT.
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Inflammatory Disease
Overview
Another scientific and commercial focus of the Company is the development
of drugs for treatment of inflammatory disease. These include MMP inhibitors for
use against degenerative diseases such as rheumatoid arthritis and
osteoarthritis and AICART inhibitors for use as anti-inflammatory agents and
immuno-suppressive agents for treatment of various neuro-degenerative disorders.
MMP Inhibitors
In addition to their role in the growth and metastasis of solid tumors,
MMPs display high levels of enzymatic activity in degenerative diseases such as
rheumatoid arthritis and osteoarthritis. Certain members of the MMP family are
associated most closely with these disease states and, Agouron believes, offer
targets for orally active drugs with potential for minimal toxicity. The
development of MMP inhibitors associated with these disease states is being
pursued by an affiliate of Roche. If successfully developed by the Roche
affiliate, the Company believes such selective inhibitors of certain MMPs have
the potential to interrupt the progression of arthritic disease itself rather
than just to treat the symptoms. The Company will receive a royalty on sales by
Roche of any anti-inflammatory products resulting from the collaborative
program.
AICART Inhibitors
AICART is being pursued by Agouron scientists as a target for the
development of novel anti-inflammatory drugs. It is widely believed that the
anti-inflammatory effects observed following administration of low doses of the
anti-cancer drug methotrexate result from the drug's indirect inhibition of
AICART. Used for chronic therapy, methotrexate accumulates in the liver and
other tissues and frequently results in serious toxicity. Agouron scientists
believe that inhibitors of AICART designed to avoid accumulation in tissues may
be superior anti-inflammatory drugs for conditions such as arthritis. The
Company's initial lead compounds in this program are being used to validate this
hypothesis. Having solved the three-dimensional molecular structure of the
AICART enzyme, Agouron scientists are engaged in the design of novel inhibitors
of the AICART enzyme. No candidate for development has yet been identified in
this program. The Company presently retains all commercial rights to any
compounds resulting from this program.
The research programs of the Company's newly acquired wholly-owned subsidiary,
Alanex Corporation, are described below:
Pain
Overview
The drugs used for the treatment of severe or chronic pain are generally of
limited effectiveness or associated with problems of tolerance, addiction and
gastrointestinal side effects.
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As a result, there is a substantial need for effective pain relieving agents
with a more favorable side effect profile.
Opiate Agonist
On behalf of Astra Pharma, Alanex applied its Pharmacophore Directed
Parallel Synthesis technology to discover a new class of analgesic compounds
that interact with a novel opiate receptor target. These compounds have been
shown to be orally active in preclinical studies and are currently being
considered by Astra Pharma as clinical development candidates. Under the terms
of an agreement with Astra Pharma, Alanex is entitled to receive milestone
payments related to the development of any products resulting from the
collaborative agreement, but has no right to commercialize or receive royalties
on any such products.
Antagonist for undisclosed target
In June 1996, Alanex entered into a collaboration with Roche Bioscience to
discover an antagonist for an undisclosed target for the treatment of pain. This
project is in the lead development phase. Alanex will perform all aspects of
this drug discovery project, including high-throughput screening of its
exploratory library and lead optimization to provide Roche Bioscience with one
or more drug candidates. Roche Bioscience will fund all of Alanex's pain
antagonist research activities. The collaboration agreement provides Roche
Bioscience with an option to exclusively license compounds for further
development and worldwide commercialization. In return, Alanex would receive
milestone payments and royalties on any sales of products developed from the
collaboration.
Diabetes
Diabetes is a common and frequently devastating disease that can lead to
the development of debilitating and life-threatening cardiovascular disease,
blindness, kidney failure and neurologic disorders. Alanex currently has two
programs for the discovery of new drugs to treat diabetes. Alanex has discovered
and is optimizing lead compounds in both programs. Both development programs are
being conducted in collaboration with Novo Nordisk pursuant to an agreement
initiated in October 1995. Under terms of the agreement, Novo Nordisk provides
funding for these programs in exchange for exclusive rights to products
identified in the collaboration. In addition, Alanex will receive milestone
payments from Novo Nordisk upon the achievement of research and developmental
benchmarks as well as royalty payments based on sales of any products discovered
through Alanex's technology.
Other
Obesity
Obesity is a major risk factor responsible for the development of
hypertension, diabetes, degenerative joint disease, abnormal wound healing, and
other major medical problems.
Neuropeptide Y ("NPY") is a 36-amino acid peptide that is involved in the
regulation of the cardiovascular, immune and gastrointestinal systems. NPY is a
powerful known appetite
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stimulant and has been demonstrated to be present in abnormally high amounts in
the brains of obese animals. Alanex has discovered lead compounds that block NPY
feeding in several different preclinical models of appetite regulation. These
compounds are currently being evaluated for their effects on feeding and obesity
in preclinical models. Alanex presently retains all commercial rights to any
compounds resulting from this program.
Depression and Anxiety
Depression and anxiety represent major health problems throughout the
world. Corticotropin releasing factor ("CRF") is a 41-amino acid peptide that is
synthesized in the brain and is released following stress. Studies performed on
preclinical models and human subjects indicate a potential role of CRF in
mediating depression and anxiety. Development of a potent, orally available drug
that blocks the actions of CRF may be useful in the treatment of these
indications. Alanex has discovered lead compounds that are highly active on
specific CRF receptor subtypes, and these compounds are currently being
optimized and evaluated in preclinical models for their effects on depression
and anxiety. Alanex presently retains all commercial rights to any compounds
resulting from this program.
GnRH Antagonist Program
Gonadotropin releasing hormone ("GnRH") is a decapeptide that is
synthesized in the brain and controls the pituitary and gonadal hormones that
regulate fertility. In women, this peptide is required for successful ovulation
and, in men, it is necessary for spermatogenesis. Alanex is currently pursuing a
program to discover orally active small molecule drugs to treat two areas of
human disease that depend on GnRH action - endometriosis and sex-hormone
dependent tumors. Alanex presently retains all commercial rights to any
compounds resulting from this program.
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Business Relationships/Research and Development Agreements
The Company has funded its research and development primarily from working
capital generated from both private and public sales of its equity securities
and corporate collaborative arrangements. The Company has an ongoing program of
business development which may, from time to time, lead to the establishment of
corporate collaborations in addition to those noted below.
Roche
In January 1997, the Company and JT granted Roche certain exclusive
marketing rights to VIRACEPT in Europe and other countries outside North
America, Japan and Asia. For such rights, the Company received and recognized as
revenue in January 1997, an initial license fee of $9,000,000 and will, upon
approval of VIRACEPT in Europe, receive an additional license fee of $11,000,000
and subsequent royalties based either on Roche's sales of VIRACEPT or, in
certain circumstances, InviraseAE (saquinavir), Roche's HIV protease inhibitor.
Subsequent to the end of fiscal 1997, the Company and JT granted Roche
certain exclusive marketing rights to VIRACEPT in most Asian territories. For
such rights, the Company received a license fee of $2,000,000 during the first
quarter of fiscal 1998 and will, upon approval in one of the Asian territories,
receive an additional license fee of $1,000,000 and subsequent royalties as
described above.
In June 1996, Agouron granted Roche worldwide development rights in two
anti-cancer drugs currently being developed by the Company and agreed to
collaborate with Roche on an additional early-stage anti-cancer drug discovery
program. In return for rights to the Company's most advanced anti-cancer drug
(THYMITAQ) and an earlier stage anti-cancer compound (AG3340), Roche has paid
$15,000,000 in initial license fees and has agreed to pay milestone payments of
up to $40,000,000 and to bear 80% of the future development costs of these two
drugs. In North America, the Company and Roche will cooperatively market the two
drugs and will share equally in resulting profits. Outside of North America,
Roche will lead commercialization efforts and pay royalties to the Company or,
in certain circumstances, will share profits with the Company. For similar
commercial rights to compounds generated in a collaborative research program
focused on cyclin-dependent kinases (initially targeting the enzyme cdk4), Roche
is to provide annual research support to the Company of $3,000,000 as well as
subsequent milestone payments of up to $20,000,000 and has agreed to bear 80% of
any post-research development costs. The Company also has a right in North
America to commercialize a Roche anti-cancer product to be named in the future.
The Company received and recognized as revenue in June 1996, the initial license
payments of $15,000,000.
Japan Tobacco Inc.
In December 1992, the Company entered into an agreement with JT to
collaborate on the discovery, development and commercialization of novel
therapeutic drugs which act on key proteins related to the human immune system
("JT 1992"). In February 1994, the Company expanded its strategic alliance with
JT into the field of anti-viral drugs for the treatment of infections caused by
hepatitis C, cytomegalovirus, the herpes family of viruses and the
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rhinoviruses ("JT 1994"). In December 1994, the Company added its anti-HIV drug,
VIRACEPT, to the JT collaboration with the execution of a worldwide development
and licensing agreement ("JT HIV"). In January 1995, JT 1992 was canceled by
mutual agreement and JT 1992 resources were reallocated to JT 1994 programs. In
February 1996, JT 1994 was modified to delete rhinoviruses from the strategic
alliance.
Under the provisions of JT 1994, JT has agreed to make certain research
payments to the Company of not less than $8,000,000 over a two year period
ending December 1996. Such payments could approximate more than $21,000,000 over
a four year period if certain technical milestones are achieved. In addition, JT
made an up-front payment of $7,778,000, which was amortized to revenue over a
twenty-four month period. Under the provisions of JT HIV, JT has made payments
of $30,000,000 to Agouron representing initial and subsequent payments of
$2,500,000, $3,500,000 and $24,000,000. Additional payments representing JT's
share of VIRACEPT development costs have also been received. Agouron and JT will
ultimately share equally the costs of further development of VIRACEPT.
Under the provisions of JT 1994, the Company will have exclusive rights to
develop, manufacture and market anti-hepatitis C, anti-herpes and
anti-cytomegalovirus drugs in the United States, Canada and Mexico. JT will have
exclusive rights to develop, manufacture and market these drugs in Japan, Taiwan
and South Korea. Outside the countries in which they respectively have exclusive
rights, Agouron and JT will have co-exclusive rights to manufacture and market
jointly developed anti-hepatitis C, anti-herpes and anti-cytomegalovirus drugs.
Each company will pay royalties to the other based upon their respective sales
of anti-hepatitis C, anti-herpes and anti-cytomegalovirus drugs. Under the
provisions of JT HIV, Agouron will retain exclusive commercial rights to
VIRACEPT (with the right to sublicense, subject to JT's right of first refusal)
in the United States, Canada and Mexico. JT was granted exclusive commercial
rights to VIRACEPT (with the right to sublicense, subject to Agouron's right of
first refusal) in Japan and certain other countries in Asia. Exclusive
commercial rights (with the right to sublicense) in Europe, Asia and certain
other countries in the world have been licensed by the Company and JT to Roche.
The Company and JT will share profits and/or royalties equally from the
worldwide commercialization of VIRACEPT.
The substantive collaborations of the Company's newly acquired wholly-owned
subsidiary, Alanex Corporation, are described below.
Roche Bioscience
In April 1997, Alanex and Roche Bioscience entered into a three-year
library screening and license agreement under which Alanex will provide
compounds from its exploratory libraries on a nonexclusive basis to Roche
Bioscience and anti-cytomegalovirus. The agreement provides for Roche Bioscience
to pay a nonrefundable fee of $1,000,000 which was received and recognized as
license fee revenue in May 1997. Roche Bioscience is to pay $6,000,000 over the
three-year period during which library compounds are provided. In addition,
Roche Bioscience is obligated to make additional payments upon the achievement
of certain milestones. Under the terms of the agreement, Roche Bioscience has an
option for an exclusive royalty bearing license to active leads that arise from
the screening of the Alanex libraries.
14
<PAGE>
In June 1996, Alanex and Roche Bioscience entered into a three-year
collaboration agreement targeting the treatment of pain. Roche Bioscience is
obligated to make certain payments upon the achievement of defined milestones.
In addition, during the term of the agreement, Roche Bioscience will provide a
minimum of $5,500,000 to support research at Alanex. The agreement provides
Roche Bioscience an exclusive worldwide license to commercialize any compounds
resulting from the research that is selected by Roche Bioscience for further
development and to pay royalties to Alanex on any sales of products developed
from the collaboration.
Novo Nordisk
In October 1995, Alanex and Novo Nordisk entered into a three-year
collaboration agreement for the characterization of drugs for the treatment of
diabetes. Novo Nordisk is obligated to provide up to $4,500,000 of funding to
support research at Alanex in the field of the collaboration and to make
additional payments to Alanex upon the achievement of certain milestones. The
agreement grants Novo Nordisk an option to obtain an exclusive worldwide license
to develop and commercialize any drug candidate arising from the collaboration
which they elect to pursue. Alanex will receive royalties on the sales of any
such drug.
Competition
The pharmaceutical and biotechnology industries are subject to intense
competition and rapid and significant technological change. Many companies and
organizations, including major pharmaceutical, biotechnology and chemical
companies, universities and other research organizations, are engaged in
discovery and development of drugs for diseases targeted by the Company. For
example, the Company is aware of several pharmaceutical companies that have HIV
protease inhibitors, some of which are currently being marketed, including those
of Abbott Laboratories, Inc. ("Abbott"), Merck & Co., Inc. ("Merck") and Roche.
Certain companies and organizations have substantially greater financial and
other resources, larger research and development staffs and more extensive
production and marketing organizations, experience and capabilities than the
Company. In addition, many companies have significantly greater experience than
the Company in preclinical testing and in conducting human clinical trials of
potential pharmaceutical products and in obtaining the FDA and other regulatory
approvals. All of these companies and other research organizations compete with
the Company in recruiting and retaining highly qualified scientific and
management personnel.
Agouron was the first company to devote itself to the development and
application of protein structure-based drug design. As such, the Company
believes that it has achieved certain competitive advantages including
developmental lead time, level of commitment to the technology and the
development of certain practical or technical capabilities. However, in recent
years several pharmaceutical companies have undertaken to establish capabilities
in protein x-ray crystallography, either internally or through academic
collaborations, and can be presumed to be engaged in the use of such technology
for the same purposes as is the Company. Certain biotechnology companies and
other companies have also entered into the field of protein structure-based drug
design. For example, Abbott, NOVARTIS, Glaxo Wellcome plc ("Glaxo"), Merck and
Roche have developed programs focused on structure-based drug design. The
Company expects that the technology for protein structure-based drug design will
become more
15
<PAGE>
widely implemented over time and will ultimately become more common in the
pharmaceutical industry.
The Company believes that its ability to compete successfully will be based
on its ability to create and maintain scientifically advanced technology,
attract and retain scientific personnel with a broad range of expertise, obtain
patent protection or otherwise develop proprietary products or processes,
conduct clinical trials and obtain required government approvals on a timely
basis, select and pursue drug design projects in areas in which significant
market opportunities exist or are likely to develop, manufacture its products on
a cost-effective basis and successfully market its products either alone or in
conjunction with others. Many of the Company's competitors have substantially
greater financial resources, clinical and regulatory experience, manufacturing
capabilities and sales and marketing organizations than Agouron.
Currently, four HIV protease inhibitors are available in the United States.
FDA approval dates and estimated prescription market shares at June 30, 1997 are
noted in the following table:
<TABLE>
<CAPTION>
COMPANY PRODUCT NAME GENERIC NAME APPROVAL MARKET SHARE
<S> <C> <C> <C> <C>
Roche INVIRASE(R) saquinavir December, 1995 23%
Abbott NORVIR(R) ritonavir March, 1996 13%
Merck CRIXIVAN(R) indinavir March, 1996 42%
Agouron VIRACEPT(R) nelfinavir March, 1997 22%
</TABLE>
Future competition from new HIV protease inhibitors is expected from Glaxo
and other pharmaceutical companies.
Patents and Trade Secrets
The Company seeks patent protection for its proprietary technology and
potential products in the United States and in foreign countries. Most of the
Company's products are expected to be synthetic chemical compounds which may be
afforded patent protection under principles and procedures well established by
the United States Patent and Trademark Office under United States patent law.
The Company's strategy is to pursue a strong patent portfolio and Agouron
holds several patents, including a patent covering the chemical composition of
VIRACEPT. The Company is currently prosecuting a number of patent applications
in the United States and in various other countries seeking protection for
certain series of compounds, including THYMITAQ, VIRACEPT and certain
proprietary technology. The Company will continue to file patent applications on
its evolving technology, processes and products. The Company has recently
received one United States patent covering processes of making THYMITAQ and
related compounds and intermediates thereof. The Company's failure to obtain
patent protection for its products could have an adverse impact on the Company.
Many of the processes and much of the know-how of importance to the
Company's technology are dependent upon the skills, knowledge and experience of
its scientific and technical personnel, which skills, knowledge and experience
are not patentable. To protect its rights in these areas, the Company requires
all employees, significant consultants and advisors,
16
<PAGE>
and collaborators to enter into confidentiality agreements with Agouron. There
can be no assurance, however, that these agreements will provide meaningful
protection for the Company's trade secrets, know-how or other proprietary
information in the event of any unauthorized use or disclosure of such trade
secrets, know-how or proprietary information. Further, in the absence of patent
protection, the Company may be exposed to competitors who independently develop
substantially equivalent technology or otherwise gain access to the Company's
trade secrets, knowledge or other proprietary information.
Government Regulation
The production and marketing of the Company's products and its ongoing
research and development activities are subject to regulation for safety,
efficacy and quality by numerous governmental authorities in the United States
and other countries. Pharmaceutical products intended for therapeutic use in
humans are principally governed by the FDA regulations in the United States and
by comparable government regulations in foreign countries. Various federal,
state and local statutes and regulations also govern or influence the research
and development, manufacturing, safety, labeling, storage, record keeping,
distribution and marketing of such products. The process of completing
preclinical and clinical testing and obtaining the approval of the FDA and
similar health authorities in foreign countries to market a new drug product
requires a significant number of years and the expenditure of substantial
resources. Failures or delays by the Company or its collaborators or licensees
in obtaining regulatory approvals would adversely affect the marketing of
products being developed by the Company and the Company's ability to receive
product revenues or royalties.
The steps required by the FDA before a new human pharmaceutical product may
be marketed in the United States include: (a) preclinical laboratory tests, in
vivo preclinical studies and formulation studies; (b) the submission to the FDA
of a request for authorization to conduct clinical trials on an IND, which must
become effective before human clinical trials may commence; (c) adequate and
well-controlled human clinical trials to establish the safety and efficacy of
the drug for its intended use; (d) submission to the FDA of a NDA; and (e)
review and approval of the NDA by the FDA before the drug product may be shipped
or sold commercially. Prior to obtaining FDA approval for each product, each
manufacturing establishment for new drugs must be registered with and receive
appropriate approval by the FDA. If, after receiving approval from the FDA, a
material change is made in the manufacturing process or location, additional
regulatory review may be required.
Preclinical tests include laboratory evaluation of product chemistry and
formulation, as well as animal studies to assess the safety and efficacy of the
product. Preclinical test results are submitted to the FDA as a part of the IND.
Clinical trials are typically conducted in three sequential phases, although the
phases may overlap. Phase I represents the initial administration of the drug to
a small group of humans, either healthy volunteers or patients, to test for
safety, dosage tolerance, absorption, distribution, metabolism, excretion and
clinical pharmacology and, if possible, early indications of effectiveness.
Phase II involves studies in a small sample of the actual intended patient
population to assess the efficacy of the investigational drug for a specific
clinical indication, to ascertain dose tolerance and the optimal dose range and
to collect additional clinical information relating to safety and potential
adverse effects. Once an investigational drug is found to have some efficacy and
an acceptable clinical safety profile in the
17
<PAGE>
targeted patient population, Phase III studies are often initiated to further
establish safety and efficacy of the investigational drug in a broader sample of
the target patient population. The results of the clinical trials together with
the results of the preclinical tests and complete manufacturing information are
submitted in a NDA to the FDA for approval.
If a NDA is submitted to the FDA, there can be no assurance that such
application will be reviewed and approved by the FDA in a timely manner, if at
all. Even after initial FDA approval has been obtained, further studies,
including post-market studies, may be required to provide additional
information. Results of such post-market programs may limit or expand the
further marketing of the product, or expose the Company to product liability
claims.
The Company is also subject to foreign regulatory requirements governing
development, manufacturing and sales of pharmaceutical products that vary widely
from country to country. Approval of a drug by applicable regulatory agencies of
foreign countries must be secured prior to the marketing of such drug in those
countries. The regulatory approval process may be more or less rigorous from
country to country and the time required for approval may be longer or shorter
than that required in the United States.
In addition to the regulatory framework for pharmaceutical product
approvals, the Company is and may become subject to various federal, state,
local and foreign laws, regulations and recommendations relating to safe working
conditions, laboratory and manufacturing practices, the experimental use of
animals and the use and disposal of hazardous or potentially hazardous
substances, including radioactive compounds and infectious disease agents, used
in connection with Agouron's research and development work. The Company is
unable to predict the extent of restrictions that might arise from any
governmental or administrative action.
Manufacturing
Agouron utilizes worldwide contract manufacturing to produce VIRACEPT. The
Company procures and transfers raw materials to contracted bulk drug producers,
sends the converted bulk drug to a finishing facility and moves finished goods
into a distribution center. Product supply and associated raw materials have
been available in adequate quantities to meet business needs. In order to
accommodate anticipated sales volume growth, capacity expansion efforts are
being pursued. The Company will be dependent upon its contract manufacturers to
comply with good manufacturing practices ("GMP") and to meet its production
requirements. There can be no assurance that the Company's contract
manufacturers will timely deliver sufficient quantities of the Company's
products or that the Company would be able to find substitute manufacturers, if
necessary.
Marketing
The Company distributes VIRACEPT in the United States through wholesalers.
Sales volumes in the United States are influenced by underlying demand and
wholesale inventory management practices.
VIRACEPT is covered by Medicaid programs in all states and is covered by
virtually all state AIDS Drug Assistance Programs ("ADAPs"). Currently, VIRACEPT
is paid predominately by
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<PAGE>
Medicaid, private insurance and ADAPs. The Company offers a patient assistance
program based upon medical need for patients who have no other means of
coverage.
The Company expects VIRACEPT to be commercially available in major European
markets in the first calendar quarter of 1998 and in Japan in the second quarter
calendar 1998.
The Company's sales and marketing efforts utilize a field sales
organization which focuses primarily on office- and hospital-based physicians
including key medical thought leaders. Additionally, the Company has obtained
market access and availability for its products in part by establishing
relationships within key market segments including health maintenance
organizations, third-party payers and governmental agencies.
Human Resources
As of June 30, 1997, the Company had 708 employees, 138 of whom hold Ph.D.
or M.D. degrees. Four hundred seventy seven employees are engaged in, or
directly support, research and product development. The Company's employees are
not covered by a collective bargaining agreement and the Company considers its
relations with its employees to be excellent. The Company has entered into
confidentiality agreements with all of its employees.
19
<PAGE>
Item 2. PROPERTIES
At June 30, 1997, the Company leased approximately 263,000 square feet of
office and laboratory space in the Torrey Pines and Sorrento Valley areas of San
Diego.
The Company's corporate headquarters and administrative offices currently
comprise approximately 77,000 square feet under lease agreements which expire in
1999.
Research and Development activities are located in approximately 186,000
square feet of leased space under agreements which expire from 1999 to 2004.
These state-of-the-art facilities are designed specifically to implement and
support the Company's innovative approach to drug design. Included in the
facilities are approved scale-up laboratories in which kilogram quantities of
Company-designed drug compounds are manufactured under current GMP for use in
clinical trials. Additionally, the Company leases approximately 1,000 square
feet in the United Kingdom which is utilized by its European clinical
development staff.
Item 3. LEGAL PROCEEDINGS
The Company is involved in certain legal proceedings generally incidental
to its normal business activities. While the outcome of any such proceedings
cannot be accurately predicted, the Company does not believe the ultimate
resolution of any such existing matters should have a material adverse effect on
its financial position or results of operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of the year ended June
30, 1997 to a vote of the Company's security holders.
20
<PAGE>
PART II
Item 5. MARKET FOR THE REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded in the over-the-counter market and
prices are quoted on The Nasdaq Stock Market under the symbol AGPH. The
following table sets forth the high and low selling prices as reported by The
Nasdaq Stock Market for the periods indicated.
<TABLE>
<CAPTION>
High Low
--------- ---------
<S> <C> <C>
1996
First Quarter $ 39.250 $ 22.750
Second Quarter 35.875 22.500
Third Quarter 47.625 32.750
Fourth Quarter 47.000 32.000
1997
First Quarter $ 46.250 $ 29.000
Second Quarter 71.500 42.250
Third Quarter 101.000 67.000
Fourth Quarter 91.000 58.375
</TABLE>
On August 15, 1997, the closing price of the Company's common stock as
reported by The Nasdaq Stock Market was $94.0625 per share. There were
approximately 12,000 shareholders of the common stock of the Company as of such
date. The Company has not paid cash dividends on its common stock and does not
intend to do so in the foreseeable future.
On July 30, 1997, the Company's Board of Directors approved a two-for-one
stock split in the form of a special stock dividend of one share of common stock
for each share of the Company's common stock outstanding. The record date of the
transaction is August 15, 1997 and the distribution date will be August 26,
1997.
21
<PAGE>
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following table summarizes certain selected consolidated financial data
for each of the five years in the period ended June 30, 1997. The information
presented should be read in conjunction with the consolidated financial
statements included elsewhere in this report.
<TABLE>
<CAPTION>
(In thousands, except Years ended
per share amounts) June 30, 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of Operations:
Total revenues $132,063 $ 55,955 $ 26,722 $ 16,301 $ 8,266
Product sales 56,969 0 0 0
Net loss (42,806)* (19,523) (12,939) (9,462) (9,829)
Net loss per common share $ (3.18) $ (1.98) $ (1.77) $ (1.31) $ (1.40)
Shares used in computing net
loss per common share 13,473 9,844 7,296 7,241 6,997
To give effect for 2-for-1 stock
split declared on July 30, 1997
(unaudited):
Pro-forma net loss per common share $ (1.59) $ (.99) $ (.89) $ (.66) $ (.70)
Shares used in computing pro-forma net
loss per common share 26,946 19,688 14,592 14,482 13,994
Balance Sheet:
Working capital $115,786 $ 70,381 $ 8,837 $ 21,039 $29,933
Total assets 266,914 102,577 27,097 37,178 41,721
Long-term liabilities 7,217 1,734 1,884 2,285 2,613
Stockholders' equity # 191,282 75,583 12,591 24,852 33,757
</TABLE>
* Includes the write-off of $57,500,000 of in-process technology
associated with the acquisition of Alanex Corporation, partially offset
by the realization of $43,800,000 of deferred tax assets associated
with the Company's expectation of future taxable income.
# The Company has never declared or paid cash dividends on its common
stock.
22
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
This discussion contains forward-looking statements and such statements are
subject to certain risks and uncertainties which could cause actual results to
differ materially from those projected. See "Important Factors Regarding
Forward-Looking Statements" attached as Exhibit 99 to the Company's annual
report on Form 10-K for the year ended June 30, 1997. Readers are cautioned not
to place undue reliance on these forward-looking statements which speak only as
of the date hereof. The Company undertakes no obligation to publicly release the
result of any revisions to these forward-looking statements which may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
The Company has been engaged in the research and development of human
pharmaceuticals utilizing protein structure-based drug design since its
inception in 1984. Such research and development has been funded principally
from the Company's equity-derived working capital and through collaborative
arrangements with other companies. The Company's net operating losses incurred
since inception are primarily a result of the Company's independent research and
development activities and an investment in the clinical and commercial
development of its two leading compounds in cancer and AIDS. Net losses for the
fiscal years ended June 30, 1997, 1996 and 1995 were $42,806,000, $19,523,000
and $12,939,000. In March 1997, the Company received approval from the United
States Food and Drug Administration (the FDA) to market VIRACEPT (nelfinavir
mesylate, an HIV protease inhibitor) in the United States. For the fourth
quarter of fiscal 1997, due principally to the increasing product contribution
from VIRACEPT sales and before the application of the one-time write-off of
$57,500,000 associated with the acquisition of Alanex Corporation ("Alanex"),
the Company realized a pre-tax profit of $3,201,000. It is anticipated that
product sales will continue to increase from quarter to quarter during fiscal
1998 and the Company should be profitable for fiscal 1998. It is also
anticipated that the Company may be profitable in each quarter of fiscal 1998.
Results of Operations
Product sales
In March 1997, the Company received clearance from the FDA to market its
anti-HIV drug, VIRACEPT. Product sales for the period ended June 30, 1997 were
approximately $57,000,000. VIRACEPT is one of four FDA-approved HIV protease
inhibitors which, when used in combination with other anti-HIV drugs (commonly
referred to as a "cocktail"), have become the preferred method for treating HIV
infected patients in the United States. Market demand is expected to increase
for protease inhibitors as combinations containing these drugs are increasingly
prescribed for patients with earlier-stage HIV infection. The Company
anticipates that future product sales of VIRACEPT will increase accordingly.
23
<PAGE>
Contract revenues, license fees
Collaborative research and development agreements with Japan Tobacco Inc.
("JT"), Hoffmann-La Roche Inc. and F. Hoffmann-La Roche Ltd. (collectively
"Roche") and Syntex (U.S.A.) Inc. accounted for substantially all of the
Company's total contract and license revenues for 1997, 1996 and 1995. Total
contract and license revenues for 1997 increased approximately 34% over 1996 due
mainly to increased program activity and spending on the JT collaborations and
an initial license payment from Roche for certain marketing rights to VIRACEPT.
The increase in contract and license revenues from 1995 to 1996 of approximately
109% was due principally to the effect of a full year of increasing program
activities on the anti-HIV collaboration with JT (initiated in December 1994)
and the initial payments associated with a collaboration (June 30, 1996) with
Roche. The Company anticipates that contract revenue and license fees for fiscal
1998 will approximate the amounts recorded in fiscal 1997.
Cost of product sales
The aggregate cost of product sales as a percentage of product sales was
approximately 43% for the period ended June 30, 1997. The Company anticipates
that gross margins will improve as product sales volumes increase and certain
manufacturing process and scale efficiencies are realized. Aggregate gross
margins will also be impacted by the size of the Company's patient assistance
program, the Company's manufacturing supply agreement with Roche and the level
of sales subject to Medicaid and other discounts or rebates in the United
States.
Research and development
Research and development spending increased by approximately 52% from 1996
to 1997 due generally to increasing average research and development staff
levels (approximately 39%) and staff-related expenditures (including occupancy),
increased expenditures in support of human clinical trials, an expanded access
program associated with VIRACEPT and increased expenditures for clinical trial
activities associated with THYMITAQo (nolatrexed dihydrochloride) and AG3340.
Research and development spending increased by approximately 96% from 1995 to
1996 due generally to increasing average research and development staff levels
(approximately 23%) and staff-related expenditures and significantly increased
expenditures for human clinical trial activities associated with VIRACEPT and
THYMITAQ. Collaborator-funded program expenditures representing 84%, 72% and 65%
of total research and development expenses in 1997, 1996 and 1995, generated a
significant majority of the increases in research and development expenses. The
Company's self-funded research and development programs generated approximately
16%, 28% and 35% of total research and development expenses in 1997, 1996 and
1995. The Company anticipates that total research and development expenses in
fiscal 1998 will exceed fiscal 1997 expenses by approximately 10%.
Selling, general and administrative
Selling, general and administrative expenses represented approximately 24%
of total operating expenses (excluding the cost of product sales and write-off
of in-process technology purchased) in 1997 and 11% in each of 1996 and 1995.
Spending increases from 1996 to 1997 are due chiefly to increasing staff levels
(approximately 214%) and staff-related expenditures,
24
<PAGE>
certain premarketing and advertising and promotion costs associated with the
launch of VIRACEPT in March 1997 and other costs associated with a growing sales
and marketing infrastructure. Spending increases from 1995 to 1996 are due
principally to increasing average staff levels (approximately 38%) and
staff-related expenditures including occupancy. Also contributing to the 1996
increase are certain costs associated with a growing sales and marketing
infrastructure. The Company anticipates that total selling, general and
administrative expenses will increase in fiscal 1998 due to the full-year effect
of fiscal 1997 staff additions, additional occupancy costs, increasing sales and
marketing activities and the support of VIRACEPT Phase IV marketing studies.
Royalties
Pursuant to the terms of the VIRACEPT Development and License Agreement
with JT, the Company anticipates that royalty expense in fiscal 1998 will be
significant. Royalties in fiscal 1997 were not significant.
Write-off of in-process technology purchased
In the fourth quarter of fiscal 1997, the Company acquired Alanex
Corporation ("Alanex"), a research company engaged in the discovery of drug
leads through the high-speed screening of diverse chemical libraries designed by
computational methods and generated by combinatorial chemistry. Alanex was
acquired in a purchase transaction through the issuance, or potential issuance,
of approximately 996,000 shares of the Company's common stock valued at
approximately $61,000,000, plus $1,300,000 of related acquisition costs. The
purchase price was allocated to various tangible and intangible assets and
either capitalized (approximately $4,800,000) or expensed (approximately
$57,500,000) as in-process technology based on an independent valuation of the
Alanex assets, technology and research programs at the date of acquisition.
Interest and other income
Interest income increased by approximately 23% from 1996 to 1997 due
principally to a higher average investment portfolio balance resulting from the
July 1996 public offering, receipt of a total of $24,000,000 in license fees
from Roche (June 1996 and January 1997), significantly increased funding from JT
and Roche and the exercise of employee stock options. Interest income increased
from 1995 to 1996 due to a higher average investment portfolio balance resulting
from the receipt of a $24,000,000 payment from JT in August 1995 and a public
offering of common stock in September 1995. The Company anticipates that, absent
additional revenue sources or a significant change in interest rates, fiscal
1998 interest income will be less than that of fiscal 1997.
Interest expense
Interest expense decreased in 1997 by approximately 38% due to a decreasing
level of debt and capital lease obligations from year to year. Interest expense
decreased in 1996 due to a decreasing level of debt and capital lease
obligations but such decrease was totally offset by the exercise costs
associated with certain lease buy-out options.
25
<PAGE>
Income tax provision (benefit)
Based on its fourth quarter pre-tax profit (excluding the non-recurring
charge associated with the acquisition of Alanex) and its estimates of future
taxable income, the Company believes that it is more likely than not that its
deferred tax assets (comprised mostly of net operating loss carryforwards and
research credits) will be realized and has therefore recorded the full tax
benefit of its deferred tax assets as of June 30, 1997. An income tax provision
representing approximately 40% of any future pre-tax net income will be made on
a quarterly basis.
Liquidity and Capital Resources
Historically, the Company has relied principally on equity financings and
corporate collaborations to fund its operations and capital expenditures.
However, on March 14, 1997, the Company received clearance from the FDA to
market its anti-HIV drug, VIRACEPT. Fiscal 1997 sales of VIRACEPT since its FDA
approval have resulted in a gross margin of $32,370,000. The Company anticipates
that net sales of VIRACEPT will steadily increase through at least fiscal 1998
and provide an increasingly significant contribution toward funding the
Company's operations.
At June 30, 1997, the Company had net working capital of approximately
$115,786,000, an increase of $45,405,000 over June 30, 1996 levels due
principally to the commercialization of VIRACEPT and the resultant increases in
inventory ($58,800,000), trade accounts receivable ($26,055,000) and accounts
payable ($22,174,000). It is anticipated that these working capital components
and cash and short-term investments will continue to be significantly impacted
as VIRACEPT sales increase. At June 30, 1997, the Company had cash, cash
equivalents and short-term investments of approximately $91,317,000. The Company
believes that its current capital resources, existing contractual commitments
and anticipated VIRACEPT product sales contribution are sufficient to maintain
its current operations through fiscal 1998. This belief is based on current
research and clinical development plans, anticipated working capital
requirements associated with the expanding commercialization of VIRACEPT, the
current regulatory environment, historical industry experience in the
development of therapeutic drugs and general economic conditions.
The Company believes that additional financing may be required to meet the
planned operating needs after fiscal 1998 if significant positive cash flows are
not generated from commercial activities. Such needs would include the
expenditure of substantial funds to continue and expand research and development
activities, conduct existing and planned preclinical studies and human clinical
trials and to support the increasing working capital requirements of a growing
commercial infrastructure including manufacturing, sales and marketing
capabilities. As a result, the Company may be required to pursue various
financing alternatives such as commercial lines of credit, collaborative
arrangements and additional public offerings or private placements of Company
securities. If such alternatives are not available, the Company may be required
to defer or restrict certain commercial activities, delay or eliminate
expenditures for certain of its potential products under development or to
license third parties to commercialize products or technologies that the Company
would otherwise seek to develop or commercialize itself.
26
<PAGE>
Capital Expenditures
During 1997, capital expenditures totaled $14,727,000 compared with
$3,710,000 and $2,032,000 during 1996 and 1995, of which $2,355,000, $457,000
and $17,000 were financed through capital lease obligations. Of the total
capital expenditures during 1997, 1996 and 1995, approximately $4,728,000,
$318,000 and $130,000 represented leasehold improvement costs associated with
certain of the Company's facilities. With the exception of the leasehold
improvement costs, virtually all of the capital expenditures during 1997, 1996
and 1995 represented laboratory and office equipment and scientific
instrumentation necessary to support an expanding research, development, and
commercial infrastructure.
Capital expenditures during 1998 are expected to be approximately
$14,000,000 to support continued product commercialization, development and
research activities. Of the total expected capital expenditures during 1998,
approximately $5,000,000 is associated with the leasehold improvement of
existing and anticipated new administrative and laboratory facilities. The
Company may utilize lease or debt financing for certain expenditures if
available on acceptable terms.
27
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES PAGE
- -------------------------------------------- ----
Report of Independent Accountants F-1
Consolidated Balance Sheet as of June 30, 1997 and 1996 F-2
Consolidated Statement of Operations for the years ended F-3
June 30, 1997, 1996 and 1995
Consolidated Statement of Stockholders' Equity for the
years ended June 30, 1997, 1996 and 1995 F-4
Consolidated Statement of Cash Flows for the years ended
June 30, 1997, 1996 and 1995 F-5
Notes to Consolidated Financial Statements F-6
NOTE: All schedules are omitted because they are not applicable, or not
required, or because the required information is included in the
consolidated financial statements or notes thereto.
28
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Agouron Pharmaceuticals, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Agouron
Pharmaceuticals, Inc. and its subsidiary at June 30, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended June 30, 1997, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
San Diego, California
July 30, 1997
F-1
<PAGE>
AGOURON PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS
June 30,
-----------------------------
Current assets: 1997 1996
---------- -----------
<S> <C> <C>
Cash and cash equivalents $ 52,484 $ 16,451
Short-term investments 38,833 74,424
Accounts receivable, net 31,375 2,966
Inventories 58,800 0
Current deferred tax assets 500 0
Other current assets 2,209 1,800
---------- -----------
Total current assets 184,201 95,641
Property and equipment, net 22,613 6,936
Deferred tax assets 56,000 0
Purchased intangibles 4,100 0
---------- -----------
$ 266,914 $ 102,577
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 28,833 $ 6,659
Accrued liabilities 8,889 4,327
Deferred revenue 27,567 13,788
Current deferred tax liabilities 600 0
Current portion of long-term debt 2,526 486
---------- -----------
Total current liabilities 68,415 25,260
---------- -----------
Long-term liabilities:
Long-term debt, less current portion 5,940 501
Accrued rent 1,277 1,233
---------- -----------
Total long-term liabilities 7,217 1,734
---------- -----------
Stockholders' equity:
Common stock, no par value, 75,000,000 shares authorized,
14,714,960 and 10,731,687 shares issued and outstanding 317,133 158,628
Accumulated deficit (125,851) (83,045)
---------- -----------
Total stockholders' equity 191,282 75,583
---------- -----------
Commitments (Note 8)
$ 266,914 $ 102,577
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
AGOURON PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Years ended June 30,
--------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
Product sales $ 56,969 $ 0 $ 0
Contract 65,094 40,955 26,722
License fees 10,000 15,000 0
------------- ------------- -------------
132,063 55,955 26,722
------------- ------------- -------------
Operating expenses:
Cost of product sales 24,599 0 0
Research and development 108,137 71,010 36,317
Selling, general and administrative 32,941 8,082 3,494
Write-off of in-process technology purchased 57,500 0 0
------------- ------------- -------------
223,177 79,092 39,811
------------- ------------- -------------
Operating loss (91,114) (23,137) (13,089)
------------- ------------- -------------
Other income (expense):
Interest and other income 5,873 4,776 1,239
Interest expense (142) (228) (225)
------------- ------------- -------------
5,731 4,548 1,014
------------- ------------- -------------
Loss before income taxes (85,383) (18,589) (12,075)
Income tax provision (benefit) (42,577) 934 864
------------- ------------- -------------
Net loss $ (42,806) $ (19,523) $ (12,939)
============= ============= =============
Net loss per common share $ (3.18) $ (1.98) $ (1.77)
============= ============= =============
Shares used in computing net loss per common share 13,473 9,844 7,296
============= ============= =============
To give effect for 2-for-1 stock split declared on
July 30, 1997 (unaudited):
Pro-forma net loss per common share $ (1.59) $ (.99) $ (.89)
============= ============= =============
Shares used in computing pro-forma net loss per
common share 26,946 19,688 14,592
============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
AGOURON PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Stock
------------------------------- Accumulated
Shares Amount Deficit Total
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Balance at June 30, 1994 7,278,488 $ 75,435 $ (50,583) $ 24,852
Stock issuances:
Exercise of stock options 49,125 382 -- 382
Employee stock purchase plan 31,669 296 -- 296
Net loss -- -- (12,939) (12,939)
------------- ------------- ------------- -------------
Balance at June 30, 1995 7,359,282 76,113 (63,522) 12,591
Stock issuances:
Public sale 3,000,000 78,579 -- 78,579
Exercise of stock options 293,206 2,990 -- 2,990
Exercise of stock warrants 45,000 283 -- 283
Employee stock purchase plan 34,199 663 -- 663
Net loss -- -- (19,523) (19,523)
------------- ------------- ------------- -------------
Balance at June 30, 1996 10,731,687 158,628 (83,045) 75,583
Stock issuances:
Public sale 2,735,000 77,245 -- 77,245
Acquisition of Alanex 722,118 61,051 -- 61,051
Exercise of stock options 490,236 6,720 -- 6,720
Employee stock purchase plan 35,919 1,389 -- 1,389
Tax benefit of stock options exercised -- 12,100 -- 12,100
Net loss -- -- (42,806) (42,806)
------------- ------------- ------------- -------------
Balance at June 30, 1997 14,714,960 $ 317,133 $ (125,851) $ 191,282
============= ============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
AGOURON PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Years ended June 30,
------------------------------------------
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from product sales, contracts and licenses $ 116,692 $ 61,376 $ 25,633
Cash paid to suppliers, employees and service providers (195,890) (73,738) (34,113)
Interest received 5,873 4,776 1,239
Interest paid (142) (228) (225)
----------- ----------- -----------
Net cash provided (used) by operating activities (73,467) (7,814) (7,466)
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from maturities/sales of short-term investments 127,501 59,686 18,000
Purchases of short-term investments (91,227) (118,224) (6,129)
Purchase of property and equipment (12,372) (3,252) (1,978)
Cost to acquire Alanex, net of cash acquired 608 0 0
----------- ----------- -----------
Net cash provided (used) by investing activities 24,510 (61,790) 9,893
----------- ----------- -----------
Cash flows from financing activities:
Net proceeds from issuance of common stock 85,354 82,515 678
Principal payments under equipment leases (394) (373) (613)
Increase (decrease) in long-term debt, net 30 (445) (238)
----------- ----------- -----------
Net cash provided (used) by financing activities 84,990 81,697 (173)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 36,033 12,093 2,254
Cash and cash equivalents at beginning of year 16,451 4,358 2,104
----------- ----------- -----------
Cash and cash equivalents at end of year $ 52,484 $ 16,451 $ 4,358
=========== =========== ===========
Reconciliation of net loss to net cash provided (used)
by operating activities:
Net loss $ (42,806) $ (19,523) $ (12,939)
Depreciation and amortization 3,910 2,411 2,455
Write-off of in-process technology purchased 57,500 0 0
Change in deferred tax assets (43,800) 0 0
Net (increase) decrease in inventory (58,547) 0 0
Net (increase) decrease in accounts receivable and other
current assets (28,209) (1,198) 4
Net increase (decrease) in accounts payable, accrued
liabilities, deferred revenue and other liabilities 38,485 10,496 3,014
----------- ----------- -----------
Net cash provided (used) by operating activities $ (73,467) $ (7,814) $ (7,466)
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
AGOURON PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - The Company and its significant accounting policies
The Company
Agouron Pharmaceuticals, Inc. ("Agouron" or the "Company") was incorporated
in the state of California on June 22, 1984 and is an integrated pharmaceutical
company committed to the discovery, development, manufacturing and marketing of
small molecule drugs engineered to inactivate proteins which play key roles in
cancer, AIDS, and other serious diseases. The Company, through its own sales and
marketing force, is currently marketing VIRACEPTAE (nelfinavir mesylate), an
inhibitor of the HIV protease, which was cleared for marketing by the United
States Food and Drug Administration ("FDA") in March 1997. The Company intends
to commercialize any subsequently developed products through its own sales and
marketing force in certain markets or, when appropriate, through manufacturing
and marketing relationships with other pharmaceutical companies.
Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Alanex Corporation ("Alanex"), the results of
which are reflected since its acquisition in a purchase transaction valued at
approximately $62,300,000. All significant intercompany accounts and
transactions have been eliminated.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses and related disclosures as of the date of the financial statements.
Actual results could differ from such estimates.
At June 30, 1997, it has been assumed that the existing collaborations with
Japan Tobacco Inc. ("JT") and Hoffmann-La Roche Inc. and F. Hoffmann-La Roche
Ltd ("Roche") will continue in accordance with their agreement terms. As such,
approximately $23,737,000 of cash received from JT and $3,000,000 of cash
received from Roche have been classified as deferred contract revenue.
Approximately $22,300,000 of the cash received from JT represents JT's advance
of the Company's VIRACEPT development funding obligation through December 1997.
Such amounts are to be repaid by the Company out of future profits, if any,
generated by sales of VIRACEPT in the United States. The balance of the payments
from JT and Roche are non-refundable and are being recognized as contract
revenue on a prospective basis generally as collaborative program expenses are
incurred. Should any of the underlying collaborations be terminated in advance
of their contract terms, any deferred contract revenues related to such
collaborations would immediately be recognized as revenue by the Company.
F-6
<PAGE>
Cash and cash equivalents
The Company considers cash equivalents to be only those investments which
are highly liquid, readily convertible to cash and which mature within three
months from date of purchase. Included in cash and cash equivalents at June 30,
1997 is $2,000,000 which has been pledged as collateral for certain commercial
letters of credit.
Short-term investments
Short-term investments consist principally of government or government
agency securities, corporate notes and bonds, commercial paper and certificates
of deposit with original maturities of three to thirty-six months. The Company
has classified its short-term investments as available-for-sale. Included in
short-term investments at June 30, 1997 and 1996 is $588,000 and $1,156,000 of
accrued interest receivable.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.
Concentration of credit and market risk and off balance sheet risk
The Company invests its excess cash principally in marketable securities
from a diversified portfolio of institutions with strong credit ratings and, by
policy, limits the amount of credit exposure at any one institution. These
investments are generally not collateralized and primarily mature within one
year. The Company has not realized any material losses from such investments in
1997, 1996 or 1995.
Financial instruments and risk management
The Company has contract manufacturing operations in Europe and Asia.
Accordingly, the Company from time-to-time enters into forward contracts to
manage its exposure to fluctuations in foreign currency exchange rates. At June
30, 1997, the Company had several forward contracts with maturities of less than
three months to purchase Japanese yen for approximately $4,095,000. These
contracts are designated and effective as hedges and, accordingly, gains and
losses are recognized in the same period the offsetting gains and losses of
hedged transactions are realized and recognized.
F-7
<PAGE>
Property and equipment
Property and equipment is recorded at cost. Depreciation is computed using
principally the straight-line method over estimated useful lives of three to
five years. Leasehold improvements are amortized over the life of the lease.
Purchased intangibles
In conjunction with the acquisition of Alanex, the Company has recorded
purchased intangibles (primarily drug discovery technology and chemical compound
libraries) which are being amortized on a straight-line basis over their
estimated useful lives of seven years.
Product sales
In March 1997, the Company received clearance from the FDA to market its
anti-HIV drug, VIRACEPT. The Company has the exclusive right to market VIRACEPT
in North America. Accordingly, in March, the Company began shipping VIRACEPT to
wholesalers throughout the United States. The Company recognizes sales revenue
upon shipment. Sales are reported net of discounts, rebates, chargebacks and
product returns.
Also included in product sales are sales (at cost plus contractually
determined mark-ups) to Roche of clinical and commercial drug supplies to be
used by Roche in its licensed territory. The Company will receive a royalty on
Roche's subsequent commercial sales of such supplies.
Contract revenues
Contract revenues are earned and recognized generally as contract research
costs are incurred according to the provisions of each collaborative agreement.
Amounts received in advance of performance are recorded as deferred revenue.
Contract milestone payments are recognized as revenues upon the completion of
the milestone event or requirement.
License fees
License fees are recognized as revenue when earned as generally evidenced
by certain factors including: receipt of such fees, satisfaction of any
performance obligations and the non-refundable nature of such fees.
Research and development costs
Research and development costs are expensed in the period incurred.
F-8
<PAGE>
Income tax provision (benefit)
The Company records a provision (benefit) for income taxes using the
liability method. Current income tax expense (benefit) generally is the amount
of income taxes expected to be payable for the current year. Deferred taxes are
recorded by applying applicable tax rates to cumulative temporary differences
based on when and how they are expected to affect the tax return.
Stock-based compensation plans
As permitted by Statement of Financial Accounting Standards No. 123
"Accounting for Stock-Based Compensation" ("FAS 123"), the Company has elected
to continue to account for stock options and stock-based awards in accordance
with APB Opinion No. 25 ("Accounting for Stock Issued to Employees").
Accordingly, the Company has provided in Note 7 the pro-forma disclosures
required by FAS 123.
Statement of cash flows
For purposes of the Statement of Cash Flows, cash equivalents are highly
liquid investments purchased with an original maturity of ninety days or less.
Non-cash financing and investing activities are comprised primarily of capital
lease obligations (which were $2,355,000, $457,000 and $17,000 for 1997, 1996
and 1995) and the acquisition of Alanex in 1997.
New accounting standard
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 "Earnings Per Share" ("FAS 128"),
which will be effective for financial statements for periods ending after
December 15, 1997, including interim periods, and establishes standards for
computing earnings per share. Earlier application is not permitted. Under the
new requirements, primary and fully diluted earnings per share will be replaced
with basic and diluted earnings per share. Basic earnings per share excludes the
dilutive effect of stock options and is generally higher than primary earnings
per share. In its consolidated financial statements for the quarter ending
December 31, 1997, the Company will disclose basic and diluted earnings (loss)
per share and provide a reconciliation of the numerator and denominator of its
basic and diluted earnings (loss) per share computations, as required. The
Company will restate all prior period earnings (loss) per share data upon
adoption of FAS 128. The application of FAS 128 for the five years ended June
30, 1997 would not have a material effect on the Company's per share data
presented for those periods.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current
year presentation.
F-9
<PAGE>
Note 2 - Short-term investments
The cost of the Company's investment portfolio by type of security and
contractual maturity in the balance sheet is as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) June 30,
---------------------------------
1997 1996
------------- --------------
<S> <C> <C>
Type of security:
Corporate debt securities $ 24,401 $ 8,535
U.S. Treasury securities and obligations
of U.S. government agencies 11,994 62,883
Other interest-bearing securities 2,438 3,006
------------- --------------
$ 38,833 $ 74,424
============= ==============
Contractual maturity:
Maturing in less than twelve months $ 35,827 $ 69,414
Maturing between twelve and
twenty-one months 3,006 5,010
------------- --------------
$ 38,833 $ 74,424
============= ==============
</TABLE>
The cost of securities sold is based upon the specific identification
method. There were no material unrealized gains or losses nor any material
differences between the estimated fair values and costs of securities in the
investment portfolio at June 30, 1997 and 1996. Realized gains and losses on the
disposal of available-for-sale securities during 1997 totaled $12,000 and
$4,000, respectively. During 1996 such gains totaled $22,000. During 1995, such
gains and losses totaled $3,000 and $7,000, respectively.
F-10
<PAGE>
Note 3 - Composition of certain financial statement captions
<TABLE>
<CAPTION>
June 30,
--------------------------
1997 1996
---------- -----------
(Dollars in thousands)
<S> <C> <C>
Accounts receivable:
Trade, net of an allowance for doubtful accounts of $60 $ 26,055 $ 0
Employee 269 211
Contract 4,668 2,645
Other 383 110
---------- -----------
$ 31,375 $ 2,966
========== ===========
Inventories:
Raw materials $ 18,462 $ 0
Work in process 39,421 0
Finished goods 917 0
---------- -----------
$ 58,800 $ 0
========== ===========
Property and equipment, net:
Scientific instrumentation $ 16,614 $ 9,353
Computer equipment 8,892 6,881
Leasehold improvements 10,804 3,184
Furniture and fixtures 2,464 1,228
---------- -----------
38,774 20,646
Less accumulated depreciation and amortization (16,161) (13,710)
---------- -----------
$ 22,613 $ 6,936
========== ===========
Accrued liabilities:
Vacation $ 1,932 $ 735
Payroll taxes 1,670 4
Commissions 469 0
Clinical studies 3,578 3,207
Other 1,240 381
---------- -----------
$ 8,889 $ 4,327
========== ===========
</TABLE>
F-11
<PAGE>
Note 4 - Significant contract arrangements
Roche
In January 1997, the Company and JT granted Roche certain exclusive
marketing rights to VIRACEPT in Europe and other countries outside North
America, Japan and Asia. For such rights, the Company received and recognized as
revenue in January 1997, an initial license fee of $9,000,000 and will, upon
approval of VIRACEPT in Europe, receive an additional license fee of $11,000,000
and subsequent royalties based either on Roche's sales of VIRACEPT or, in
certain circumstances, Invirase(R) (saquinavir), Roche's HIV protease inhibitor.
Subsequent to the end of fiscal 1997, the Company and JT granted Roche
certain exclusive marketing rights to VIRACEPT in several Asian territories. For
such rights, the Company received a license fee of $2,000,000 during the first
quarter of fiscal 1998 and will, upon approval in one of the Asian territories,
receive an additional license fee of $1,000,000 and subsequent royalties as
described above.
In June 1996, Agouron granted Roche worldwide development rights in two
anti-cancer drugs currently being developed by the Company and agreed to
collaborate with Roche on an additional early-stage anti-cancer drug discovery
program. In return for rights to the Company's most advanced anti-cancer drug
(THYMITAQ) and an earlier stage anti-cancer compound (AG3340), Roche has paid
$15,000,000 in initial license fees and has agreed to pay milestone payments of
up to $40,000,000 and to bear 80% of the future development costs of these two
drugs. In North America, the Company and Roche will cooperatively market the two
drugs and will share equally in resulting profits. Outside of North America,
Roche will lead commercialization efforts and pay royalties to the Company or,
in certain circumstances, will share profits with the Company. For similar
commercial rights to compounds generated in a collaborative research program
focused on cyclin-dependent kinases (initially targeting the enzyme cdk4), Roche
is to provide annual research support to the Company of $3,000,000 as well as
subsequent milestone payments of up to $20,000,000 and has agreed to bear 80% of
any post-research development costs. The Company also has a right in North
America to commercialize a Roche anti-cancer product to be named in the future.
The Company received and recognized as revenue in June 1996, the initial license
payments of $15,000,000.
Under the terms of the combined agreements with Roche, the Company incurred
costs of $17,854,000 and recognized corresponding contract revenues of
$14,270,000 for the year ended June 30, 1997.
In June 1996, the Company completed a three-year agreement with Syntex
(U.S.A.) Inc. (now a subsidiary of Roche), to collaborate on the discovery of
novel matrix metalloprotease inhibitor drugs. Each company may pursue further
discovery or development efforts in this program area at its sole discretion and
expense with no subsequent obligations to the other company. Under the
agreement, the Company incurred costs and recognized corresponding revenues of
$3,013,000 during the year ended June 30, 1996. The Company funded a portion of
the activities associated with this collaboration on its own account.
F-12
<PAGE>
Japan Tobacco Inc.
In December 1992, the Company entered into an agreement with JT to
collaborate on the discovery, development and commercialization of novel
therapeutic drugs which act on key proteins related to the human immune system
("JT 1992"). In February 1994, the Company expanded its strategic alliance with
JT into the field of anti-viral drugs for the treatment of infections caused by
hepatitis C, the herpes family of viruses and the rhinoviruses ("JT 1994"). In
December 1994, the Company added its anti-HIV drug, VIRACEPT, to the JT
collaboration with the execution of a worldwide development and licensing
agreement ("JT HIV"). In January 1995, JT 1992 was canceled by mutual agreement
and JT 1992 resources were reallocated to JT 1994 programs. In February 1996, JT
1994 was modified to delete rhinoviruses from the strategic alliance.
Under the provisions of JT 1994, JT has agreed to make certain research
payments to the Company of not less than $8,000,000 over a two year period
ending December 1996. Such payments could approximate more than $21,000,000 over
a four year period if certain technical milestones are achieved. In addition, JT
made an up-front payment of $7,778,000, which was amortized to revenue over a
twenty-four month period. Under the provisions of JT HIV, JT has made payments
of $30,000,000 to Agouron representing initial and subsequent payments of
$2,500,000, $3,500,000 and $24,000,000. Additional payments representing JT's
share of VIRACEPT development costs have also been received. Agouron and JT will
ultimately share equally the costs of further development of VIRACEPT.
Under the provisions of JT 1994, the Company will have exclusive rights to
develop, manufacture and market anti-hepatitis C, anti herpes and
anti-cytomegalovirus drugs in the United States, Canada and Mexico. JT will have
exclusive rights to develop, manufacture and market these drugs in Japan, Taiwan
and South Korea. Outside the countries in which they respectively have exclusive
rights, Agouron and JT will have co-exclusive rights to manufacture and market
jointly developed anti-hepatitis C, anti-herpes and anti-cytomegalovirus drugs.
Each company will pay royalties to the other based upon their respective sales
of anti-hepatitis C, anti-herpes and anti-cytomegalovirus drugs. Under the
provisions of JT HIV, Agouron will retain exclusive commercial rights to
VIRACEPT (with the right to sublicense, subject to JT's right of first refusal)
in the United States, Canada and Mexico. JT was granted exclusive commercial
rights to VIRACEPT (with the right to sublicense, subject to Agouron's right of
first refusal) in Japan and certain other countries in Asia. Exclusive
commercial rights (with the right to sublicense) in Europe, Asia and certain
other countries in the world have been licensed by the Company and JT to Roche.
The Company and JT will share profits and/or royalties equally from the
worldwide commercialization of VIRACEPT.
Under the combined terms of the agreements, the Company has incurred costs
of $71,825,000, $46,969,000, and $19,211,000 and recognized corresponding
contract revenues of $48,886,000, $37,197,000 and $22,881,000 for the years
ended June 30, 1997, 1996 and 1995.
F-13
<PAGE>
The substantive collaborations of the Company's newly acquired wholly-owned
subsidiary, Alanex Corporation, are described below.
Roche Bioscience
In April 1997, Alanex and Roche Bioscience entered into a three-year
library screening and license agreement under which Alanex will provide
compounds from its exploratory libraries on a nonexclusive basis to Roche
Bioscience. The agreement provides for Roche Bioscience to pay a nonrefundable
fee of $1,000,000 which was received and recognized as license fee revenue in
May 1997. Roche Bioscience is to pay $6,000,000 over the three-year period
during which library compounds are provided. In addition, Roche Bioscience is
obligated to make additional payments upon the achievement of certain
milestones. Under the terms of the agreement, Roche Bioscience has an option for
an exclusive royalty bearing license to active leads that arise from the
screening of the Alanex libraries.
In June 1996, Alanex and Roche Bioscience entered into a three-year
collaboration agreement targeting the treatment of pain. Roche Bioscience is
obligated to make certain payments upon the achievement of defined milestones.
In addition, during the term of the agreement, Roche Bioscience will provide a
minimum of $5,500,000 to support research at Alanex. The agreement provides
Roche Bioscience an exclusive worldwide license to commercialize any compounds
resulting from the research that is selected by Roche Bioscience for further
development and to pay royalties to Alanex on any sales of products developed
from the collaboration.
Under all agreements with Roche Bioscience, Alanex incurred costs of
$376,000 and recognized corresponding contract revenues of $466,000 for the two
months ending June 30, 1997 (the period subsequent to its acquisition by
Agouron).
Novo Nordisk
In October 1995, Alanex and Novo Nordisk entered into a three-year
collaboration agreement for the characterization of drugs for the treatment of
diabetes. Novo Nordisk is obligated to provide up to $4,500,000 of funding to
support research at Alanex in the field of the collaboration and to make
additional payments to Alanex upon the achievement of certain milestones. The
agreement grants Novo Nordisk an option to obtain an exclusive worldwide license
to develop and commercialize any drug candidate arising from the collaboration
which they elect to pursue. Alanex will receive royalties on the sales of any
such drug.
Under the agreement, Alanex incurred costs of $382,000 and recognized
corresponding contract revenues of $475,000 for the two months ending June 30,
1997.
F-14
<PAGE>
Note 5 - Long-term debt
Long-term debt and capital lease obligations are as follows:
<TABLE>
<CAPTION>
June 30,
-------------------------------
1997 1996
------------- --------------
<S> <C> <C>
(Dollars in thousands)
Notes payable, secured with personal property and a $ 142 $ 486
certificate of deposit; interest at CD rate plus 1.5%,
maturing June 1997 and November 1998
Capital leases with interest rates between 5.86% and 16.5%, 2,462 501
maturing at various dates through December 2001.
Unsecured, non-interest bearing, term obligation;
face value of $4,500,000; discounted to an 8.95%
effective rate, includes imputed interest of $262,000
due June 28, 2001. 3,194 0
Term obligation for tenant improvements, interest
at 11% per annum, payable in monthly installments
maturing October 1997 and April 2002. 2,668 0
------------- --------------
Total long-term debt and capital lease obligations 8,466 987
Current portion of long-term debt (2,526) (486)
------------- --------------
Long-term debt $ 5,940 $ 501
============= ==============
</TABLE>
Maturities of long-term debt, excluding capital leases, are as follows:
1998 - $1,870,000; 1999- $243,000; 2000 - $225,000; 2001 - $251,000; 2002 -
$4,721,000 and thereafter $0, less imputed interest of $1,306,000.
F-15
<PAGE>
Note 6 - Income taxes
(Dollars in thousands)
The components of the provision (benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
Year ended June 30, 1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Current:
Federal $ 0 $ 0 $ 0
State 1 1 1
Foreign 1,222 933 863
--------- --------- --------
1,223 934 864
--------- --------- --------
Deferred:
Federal (37,800) 0 0
State (6,000) 0 0
Foreign 0 0 0
--------- --------- --------
(43,800) 0 0
--------- --------- --------
$ (42,577) $ 934 $ 864
========= ========= ========
</TABLE>
The reconciliation of income tax from loss before income taxes computed at
the federal statutory rate (34%) to the Company's actual income tax provision is
as follows:
<TABLE>
<CAPTION>
Year ended June 30, 1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Tax at U.S. federal statutory rate $ (29,030) $ (6,320) $ (4,106)
State taxes, net of federal benefit 1 1 1
Foreign taxes 1,222 933 863
Purchase accounting book/tax basis differences 19,781 0 0
Change in valuation allowance (42,449) 6,245 4,076
Other 415 75 30
Adjustments to carryover amounts 7,483 0 0
--------- --------- --------
$ (42,577) $ 934 $ 864
========= ========= ========
</TABLE>
The Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
June 30
----------------------
1997 1996
--------- ---------
<S> <C> <C>
Deferred revenue $ 0 $ 4,694
Book and tax depreciation/amortization
differences 831 2,117
Accrued liabilities 1,363 807
Net operating loss carryforwards 49,348 26,593
Foreign tax credits 0 3,746
Research and development tax credits 5,676 4,492
Uniform capitalization 1,100 0
Other (2,418) 0
--------- ---------
55,900 42,449
Valuation allowance 0 (42,449)
--------- ---------
Deferred taxes, net $ 55,900 $ 0
========= =========
</TABLE>
The Company has not recorded current provisions for any United States
income taxes due to net operating losses for tax reporting purposes. At June 30,
1997, the Company had net operating loss carryforwards for federal tax reporting
purposes of approximately $135,000,000 expiring from 2000 to 2012. The net
operating loss includes the tax benefit related to the exercise of stock
options, which benefit was recorded to common stock. The Company also has
federal research and development credit carryforwards of approximately
$3,400,000 at June 30, 1997. The future utilization of net operating loss
carryforwards for federal and state income tax purposes may be impacted by the
issuance of additional equity securities.
F-16
<PAGE>
The Company has net operating loss and research and development credit
carryforwards of approximately $31,100,000 and $2,200,000 for state tax
reporting purposes at June 30, 1997, expiring from 1998 to 2002.
Based on its fourth quarter pre-tax profit (excluding the non-recurring
charge associated with the acquisition of Alanex) and its estimates of future
taxable income, the Company believes that it is more likely than not that its
deferred tax assets (comprised mostly of net operating loss carryforwards and
research credits) will be realized and has therefore recorded the full tax
benefit of its deferred tax assets as of June 30, 1997.
Foreign tax expense represents certain withholding taxes associated with
collaboration payments from JT.
F-17
<PAGE>
Note 7 - Stockholders' equity
Stock Options
The Company has five stock option plans whereby 6,409,042 shares of the
Company's common stock have been reserved for issuance to its officers,
directors, employees and consultants. The plans, as amended, are administered by
the Board of Directors or its designees and provide generally that, for
incentive stock options, the exercise price shall not be less than the fair
market value of the shares at the date of grant and, for certain non-qualified
stock options, the price shall not be less than 85% of the fair market value of
the shares at the date of grant and may be at any price determined by the Board
of Directors for others. The options expire not later than ten years from the
date of the grant and generally become exercisable ratably over a four year
period beginning one year from the grant date. At June 30, 1997, 1,077,078
options have been exercised, 1,749,672 were exercisable and 922,319 shares of
common stock remain available for grant. The following table summarizes stock
option activity for 1995 through 1997:
<TABLE>
<CAPTION>
Shares Prices
------------- ------------------
<S> <C> <C>
Outstanding June 30, 1994 1,905,439
Options granted 773,275 $ 10.13 - $ 24.50
Options exercised (49,125) 5.40 - 15.50
Options canceled (43,897) 7.88 - 16.13
-------------
Outstanding June 30, 1995 2,585,692 .47 - 24.50
Options granted 1,162,475 23.56 - 46.00
Options exercised (293,206) 5.40 - 18.38
Options canceled (40,604) 7.88 - 39.13
-------------
Outstanding June 30, 1996 3,414,357 5.40 - 46.00
Alanex options assumed 189,042 .53 - 7.96
Options granted 1,399,250 30.38 - 94.25
Options exercised (490,236) .53 - 44.38
Options canceled (102,768) 8.63 - 72.69
-------------
Outstanding June 30, 1997 4,409,645 $ .53 - $ 94.25
=============
</TABLE>
F-18
<PAGE>
The following table summarizes information concerning outstanding and
exercisable options as of June 30, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------ ----------------------------
Number Weighted Weighted Number Weighted
Outstanding Average Average Exercisable Average
Ranges of Exercise as of Remaining Exercise as of Exercise
Prices June 30, 1997 Life (years) Price June 30, 1997 Price
------------- -------------- --------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Less than $16.25 1,717,954 6.21 $ 11.43 1,313,059 $ 11.60
$16.25 to $44.38 1,530,441 8.64 35.85 430,863 33.79
$44.38 to $82.00 1,088,750 9.33 71.80 5,750 60.29
Greater than $82.00 72,500 9.73 87.92 0 --
------------- -------------- -------------- ------------- -------------
4,409,645 7.88 $ 36.07 1,749,672 $ 17.23
============= ============== ============== ============= =============
</TABLE>
The Company applies APB Opinion No. 25 and related Interpretations in
accounting for its plans. Accordingly, no compensation expense has been
recognized for its stock-based compensation plans. Had compensation expense for
the Company's stock-based plans been determined based upon the fair value method
prescribed under FAS 123, the Company's net loss and related net loss per share
would have been increased to the following pro-forma amounts:
(In thousands, except per share amounts) 1997 1996
--------- --------
Net loss
As reported ($42,806) ($19,523)
Compensation expense:
Stock options (9,496) (1,133)
Employee stock purchase plan (394) (204)
-------- --------
Pro-forma ($52,696) ($20,860)
======== ========
Net loss per share
As reported ($3.18) ($1.98)
Pro-forma ($3.91) ($2.12)
The weighted-average fair value of each option grant is estimated on the
date of grant using the Black Scholes option-pricing model with the following
weighted-average assumptions used for 1997 and 1996: expected volatility of 50
percent; risk-free interest rate of 6.1 percent; an average expected life of
four years and no dividends. The weighted average fair value of stock option
grants was $30.50 per share in 1997 and $17.93 per share in 1996.
In connection with its acquisition of Alanex Corporation, the Company
assumed all of the issued and outstanding options of Alanex which resulted in
options to purchase an aggregate of 189,042 shares of the Company's common stock
at exercise prices ranging from $.53 to $7.96 per share.
F-19
<PAGE>
Employee Stock Purchase Plan
The Company has a stock purchase plan in which eligible employees may
purchase shares of the Company's common stock through payroll deductions. A
total of 250,000 shares of common stock have been reserved for issuance under
the plan, of which 120,495 shares remain available for purchase at June 30,
1997. Funds deducted from participating employees' salaries are used to purchase
common stock at prices equal to 85% of the fair market value of the common stock
on either the first or last day of a purchase period. During 1997, 4,865 shares
were issued at a price of $28.58 per share, 23,518 shares were issued at a price
of $34.74 per share and 7,536 were issued at a price of $57.38. During 1996,
6,131 shares were issued at a price of $9.88 per share, 23,240 shares were
issued at a price of $19.98 per share and 4,828 shares were issued at a price of
$28.58 per share. During 1995, 25,524 shares were issued at a price of $9.24 per
share and 6,145 shares were issued at a price of $9.88 per share.
Under FAS 123, pro-forma compensation expense equal to the fair value of
the purchase rights granted under the employee stock purchase plan was estimated
using the Black-Scholes model with the following assumptions for 1997 and 1996:
an expected life of one year; expected volatility of 50 percent; a risk-free
interest rate of 5.6 percent; and no dividends. The weighted-average fair value
of purchase rights granted was $11.91 per share in 1997 and $6.94 per share in
1996.
Warrants
In connection with its acquisition of Alanex Corporation, the Company
assumed an issued and outstanding warrant to purchase Alanex common stock.
Accordingly, at June 30, 1997, a warrant to purchase an aggregate of 84,761
shares of the Company's common stock at an exercise price of $8.02 per share was
outstanding. Pursuant to the merger agreement with Alanex, 20% of the warrant
shares are subject to certain restrictions through May 1998. In July 1997, the
warrant was exercised in its entirety generating net proceeds to the Company of
approximately $679,800.
F-20
<PAGE>
Stockholder rights plan
On November 7, 1996, the Board of Directors of the Company adopted a
Stockholder Rights Plan (the "Plan"). Under the terms of the Plan, stockholders
of record as of November 21, 1996, received a dividend of one Preferred Stock
Purchase Right ("Right(s)") for each share of common stock held on that date.
The Rights will expire 10 years after issuance, and will be exercisable only if
a person or group becomes the beneficial owner of 15% or more of the common
stock (such person or group, a "15% holder") or commences a tender or exchange
offer which would result in the offeror beneficially owning 15% or more of the
common stock. Each Right will entitle stockholders to buy one one-ten thousandth
of a share of Series B Participating Preferred Stock of the Company at an
exercise price of $500.00 per share subject to certain antidilution adjustments.
If a person or group accumulates 15% or more of the common stock, each
Right (other than Rights held by a 15% holder and certain related parties, which
will be voided) will be adjusted so that upon exercise the holder will have the
right to receive that number of shares of common stock (or in certain
circumstances, a combination of securities and/or assets) having a value of
twice the exercise price of the Right. In addition, if following the public
announcement of the existence of a 15% holder the Company is involved in a
merger or business combination or a sale of 50% or more of the Company's assets
or earning power, each Right (other than Rights held by a 15% holder and certain
related parties, which will be voided) will represent the right to purchase, at
the exercise price, common stock of the acquiring entity having a value of twice
the exercise price at the time. The Board of Directors will also have the right,
following the public announcement of the existence of a 15% holder, to cause
each Right (other than rights held by the 15% holder) to be exchanged for one
share of Common Stock.
The Board of Directors is entitled to redeem the Rights at $0.001 per Right
at any time prior to the public announcement of the existence of a 15% holder.
F-21
<PAGE>
Note 8 - Commitments
Certain scientific instrumentation, computer and other equipment are
subject to leases which are classified as capital leases. At June 30, 1997 and
1996, $2,895,000 ($2,629,000, net) and $938,000 ($484,000, net) of such leased
equipment are included in property and equipment.
Rental expenses (principally for leased facilities under long-term
operating lease commitments) were $3,509,000, $2,548,000 and $2,198,000 for
1997, 1996 and 1995. Future minimum payments for capital and operating leases at
June 30, 1997 are as follows:
<TABLE>
<CAPTION>
Capital Leases Operating Leases
-------------- ----------------
(Dollars in thousands)
<S> <C> <C>
1998 $ 683 $ 4,850
1999 669 5,564
2000 558 3,541
2001 432 3,285
2002 167 2,088
Thereafter 0 4,309
------------ --------------
Total minimum lease payments 2,509 $ 23,637
==============
Less amount representing interest (47)
------------
Obligations under capital leases $ 2,462
============
</TABLE>
The Company is involved in certain legal proceedings generally incidental
to its normal business activities. While the outcome of any such proceedings
cannot be accurately predicted, the Company does not believe the ultimate
resolution of any such existing matters should have a material adverse effect on
its financial position or results of operations.
F-22
<PAGE>
Note 9 - Alanex acquisition
On April 28, 1997, the Company executed a merger agreement with Alanex
Corporation, a research company. Under the terms of the merger agreement, Alanex
will operate as a wholly-owned subsidiary of Agouron.
Under the terms of the completed transaction, each issued and outstanding
share of Alanex common stock was exchanged for approximately .188 shares of
Agouron common stock and the Company assumed all issued and outstanding options
and warrants to purchase shares of common stock of Alanex at the previously
noted exchange rate. For all outstanding shares of common stock and related
options and warrants, approximately 995,921 shares of Agouron common stock will
be issued, subject to certain escrow, vesting and other limitations or
restrictions. Such shares had an aggregate fair market value on the measurement
date of approximately $61,000,000 and transaction costs were approximately
$1,300,000. Of the total purchase price (including transactions costs),
$57,500,000 was allocated (as more fully described below) to certain intangible
assets and expensed as in-process technology and approximately $4,800,000 was
allocated to certain tangible and intangible assets and capitalized.
The identifiable intangibles of Alanex include several drug research and
discovery programs, a proprietary drug discovery technology, a chemical compound
library and an assembled work force. These intangibles were valued using either
a replacement cost approach (work force, library and proprietary technology) or
an income approach (research programs). Values assigned to the chemical compound
library and proprietary drug discovery technology have been capitalized as such
intangibles are of a general nature and may have a number of alternative future
uses. Values assigned to the drug discovery programs have been expensed as such
programs are pursuing specific drug targets or chemical compounds, the
technological feasibility of which having not been demonstrated, and there may
be no alternative future uses for such targets or chemical compounds if the
programs are ultimately less than successful.
The Company's statement of operations includes the results of operations
related to the acquisition for the two months ending June 30, 1997. The
following are unaudited pro-forma results of operations as if the transaction
had been consummated on July 1, 1995:
(In thousands except for per share amounts.)
<TABLE>
<CAPTION>
Year ended June 30, 1997 1996
------------- -------------
(unaudited) (unaudited)
<S> <C> <C>
Revenues $ 138,872 $ 62,392
============= =============
Net income (loss) $ 14,276 $ (19,421)
============= =============
Net income (loss) per common share $ 1.02 $ (1.83)
============= =============
Net income (loss) per common share after giving
effect to 2-for-1 stock split declared on July 30, 1997 $ .51 $ (.92)
============= =============
</TABLE>
F-23
<PAGE>
Note 10 - Subsequent event
On July 30, 1997, the Company's Board of Directors approved a two-for-one
stock split in the form of a special stock dividend of one share of common stock
for each share of the Company's common stock outstanding. The record date of the
transaction is August 15, 1997 and the distribution date will be August 26,
1997. In applying the effect of the two-for-one stock split on a retroactive
basis, reported net losses per common share for the fiscal years ended June 30,
1997, 1996 and 1995 would have been $1.59, $.99 and $.89, respectively, and
total shares outstanding at June 30, 1997 and 1996 would have been 29,429,920
and 21,463,374, respectively.
Note 11 - Quarterly financial data (unaudited)
(In thousands, except for
per share amounts)
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------------------
September 30 December 31 March 31 - June 30
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
1996
Product sales $ 0 $ 0 $ 0 $ 0
Gross margin from product sales 0 0 0 0
Net loss (2,523) (4,132) (11,006) (1,862)
Net loss per common share (0.33) (0.40) (1.04) (0.17)
1997
Product sales $ 0 $ 0 $ 13,401 $ 43,568
Gross margin from product sales 0 0 7,378 24,992
Net loss (14,447) (12,556) (4,999) (10,804)
Net loss per common share (1.15) (0.93) (0.37) (0.76)
</TABLE>
F-24
<PAGE>
31
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
29
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Peter Johnson 52 President, Chief Executive Officer and Director
Marvin R. Brown, M.D. 50 Vice President
Neil J. Clendeninn, M.D., Ph.D. 48 Corporate Vice President, Clinical Affairs
Steven S. Cowell 48 Corporate Vice President, Finance and Chief
Financial Officer
William C. Denby 42 Vice President, Head of Marketing and Sales
Gary E. Friedman 50 Corporate Vice President, General Counsel,
Secretary and Director
Donna C. Nichols 40 Vice President, Head of Corporate Communications
Barry D. Quart, Pharm.D. 40 Senior Vice President, Head of Drug Development
R. Kent Snyder 43 Senior Vice President, Head of Commercial Affairs
Michael D. Varney 39 Vice President, Head of Research
Stephanie Webber 49 Vice President, Head of Development Pharmacology
Glenn R. Zinser 54 Corporate Vice President, Head of Operations
John N. Abelson, Ph.D.(1) 58 Director
Patricia M. Cloherty(2) 55 Director
A.E. Cohen(1) 61 Director
Michael E. Herman(1) 56 Director
Irving S. Johnson, Ph.D. 72 Director
Antonie T. Knoppers, M.D.(2) 82 Director
Melvin I. Simon, Ph.D. (2) 60 Director
</TABLE>
(1) Member of Directors Compensation Committee
(2) Member of Audit Committee
30
<PAGE>
Peter Johnson, a founder of the Company, has served as a director and as
president and chief executive officer of the Company since its inception in
1984. Through 1989, Mr. Johnson held various positions with The Agouron
Institute, including executive director. Mr. Johnson received a M.A. from the
University of California, San Diego.
Marvin R. Brown joined the Company in June 1997 as vice president. In 1991,
Dr. Brown founded Alanex and, from 1993 until joining the Company, served as
president, chief executive officer and chairman of the board of Alanex. Prior to
joining Alanex, Dr. Brown served as professor of medicine and surgery and
director of the peptide biology laboratory at the University of California, San
Diego from 1986 through 1991 and was on the faculty of the Salk Institute for
Biological Studies from 1975 to 1986. Dr. Brown received his M.D. from the
University of Arizona.
Neil J. Clendeninn joined the Company in February 1993 as vice president,
clinical affairs. In June 1997, Dr. Clendeninn was promoted to corporate vice
president. From 1985 until joining the Company, Dr. Clendeninn held various
positions with Burroughs Wellcome Co., including head of the chemotherapy
section from 1988. From 1981 through 1985, Dr. Clendeninn worked with the
clinical oncology and clinical pharmacology groups at the National Institutes of
Health. Dr. Clendeninn received a M.D. and a Ph.D. in pharmacology from New York
University.
Steven S. Cowell joined the Company in August 1991 as vice president,
finance and chief financial officer. In June 1997, Mr. Cowell was promoted to
corporate vice president. From 1982 until joining the Company, Mr. Cowell held
various positions, the most recent of which was vice president and controller at
Cetus Corporation, a public biotechnology company primarily engaged in the
development, manufacture and marketing of pharmaceutical products. Mr. Cowell is
a Certified Public Accountant in California and received a B.S. in business
administration from the University of California, Berkeley.
William C. Denby joined the Company in 1995 and in June 1997 was named vice
president, head of marketing and sales. Previously, Mr. Denby served as senior
director of marketing and sales. From 1978 until joining the Company, Mr. Denby
held various positions at Marion Laboratories, Inc. (now Hoechst Marion
Roussel), including strategic planning manager and managed care marketing
manager. Mr. Denby received a B.A. in English from the State University of New
York, and holds a M.B.A. in Finance from Rockhurst College.
Donna C. Nichols joined the Company in 1987 and in June 1997 was named vice
president, head of corporate communications. Previously, Ms. Nichols held
various positions within the Company, most recently as senior director,
corporate communications. Ms. Nichols attended Kent State University.
Gary E. Friedman, a founder of the Company, has served as a director since
its inception, as the secretary of the Company since May 1986 and as vice
president and general counsel since December 1991. In June 1997, Mr. Friedman
was promoted to corporate vice president. Previously, from 1982 until December
1991, Mr. Friedman was a principal of the law firm of Friedman, Jay & Cramer, a
Professional Corporation. Mr. Friedman is a California Certified Specialist in
Taxation. Mr. Friedman received a J.D. and a M.B.A. from the University of
California, Berkeley and a L.L.M. in taxation from the University of San Diego.
31
<PAGE>
Barry D. Quart joined the Company in June 1993 as vice president,
regulatory affairs. In June 1997, Mr. Quart was named to senior vice president,
head of drug development. From 1983 until joining the Company, Dr. Quart held
various positions with Bristol-Myers Squibb Company, including executive
director of international regulatory affairs from 1992. Dr. Quart received a
Pharm.D. in clinical pharmacy from the University of California, San Francisco.
R. Kent Snyder joined the Company in July 1991 as vice president, business
development. In June 1995, Mr. Snyder's title was changed to vice president,
commercial affairs and in June 1997, he was named senior vice president,
corporate affairs. From 1982 until joining the Company, Mr. Snyder held various
positions with Marion Laboratories, Inc. (now Hoechst Marion Roussel), including
director of U.S./European licensing. Prior to his employment at Marion, from
1978 to 1982, he held various sales and marketing positions with
Hoffmann-LaRoche Ltd. Mr. Snyder received a M.B.A. from Rockhurst College.
Michael D. Varney joined the Company in 1987 and in June 1997 was promoted
to vice president, head of research. A synthetic organic chemist, Dr. Varney has
been involved in all aspects of drug discovery at the Company since its
inception. Dr. Varney received his B.S. in Chemistry from UCLA and Ph.D. in
Natural Product Synthesis from the California Institute of Technology. Before
joining the Company, he completed postdoctoral research in Bioorganic Chemistry
at Columbia University.
Stephanie Webber joined the Company in 1988 and in June 1997 was promoted
to vice president, head of development pharmacology. Previously, Dr. Webber
served as senior director, pharmacology and toxicology. From 1980 to 1988, Dr.
Webber was a research fellow at the Scripps Clinic and Research Foundation. She
received her B.S. in Biology from the University of Sussex, England, and holds a
Ph.D. in Zoology from the University of London.
Glenn R. Zinser joined the Company in 1987 and, since July 1, 1995, has
served as vice president, operations. In June 1997, Mr. Zinser was promoted to
corporate vice president, head of operations. Previously, from 1987 through June
1995, Mr. Zinser held various management positions with the Company, including
senior director, operations from July 1993 through June 1995. Mr. Zinser
received a M.B.A. from the University of California, Los Angeles.
John N. Abelson, a founder of the Company, has served as a director since
its inception. Dr. Abelson, a molecular biologist, is a member of the National
Academy of Sciences. Since 1982, Dr. Abelson has been a member of the faculty of
the Division of Biology at the California Institute of Technology where, from
October 1989 until June 1995, he served as chairman. Previously, Dr. Abelson was
a member of the faculty in the Department of Chemistry at the University of
California, San Diego. Dr. Abelson received a Ph.D. in biophysics from The Johns
Hopkins University and was a postdoctoral fellow at the Laboratory of Molecular
Biology in Cambridge, England. Dr. Abelson also serves as a director of The
Agouron Institute.
32
<PAGE>
Patricia M. Cloherty joined the Board in December 1988. Since 1970, Ms.
Cloherty has been associated with Patricof & Co. Ventures, Inc. (formerly Alan
Patricof Associates, Inc.), a New York venture capital firm ("Patricof"), and
has been a general partner of its funds since 1973. In 1993, she was elected
president of Patricof. Ms. Cloherty also served as deputy administrator for the
U.S. Small Business Administration in 1977 and 1978. Ms. Cloherty also serves on
the board of directors of several private companies.
A.E. Cohen joined the Board in March 1992. Mr. Cohen is an independent
management consultant. From 1957 until his retirement in January 1992, Mr. Cohen
held various positions at Merck & Co., Inc., including senior vice president and
president of the Merck Sharp & Dohme International Division. Currently, Mr.
Cohen is the chairman of the board of Neurobiological Technologies, Inc. and is
a member of the board of directors of Akzo N.V., Teva Pharmaceutical Industries
Ltd., Vasomedical, Inc., Vion Pharmaceuticals, Inc., Smith Barney (Mutual
Funds), and Blue Stone Capital Partners, L.P., all of which are public
companies. Mr. Cohen also serves as a consultant to MeesPierson Inc., The
Population Council and Chugai Pharmaceutical Co. Ltd., Tokyo ("Chugai"), and
serves as a director of Chugai's U.S. subsidiary companies.
Michael E. Herman joined the Board in October 1992. Mr. Herman is a private
investor, as well as president and chief operating officer of the Kansas City
Royals Baseball Team. From October 1974 until his retirement in 1990, Mr. Herman
held various positions at Marion Laboratories, Inc. (now Hoechst Marion
Roussel), including executive vice president and chief financial officer.
Currently, Mr. Herman serves as chairman of the finance committee of the Ewing
Marion Kauffman Foundation, a private foundation located in Kansas City, where
from 1985 through 1990, he was the president and chief operating officer. Mr.
Herman is also a member of the board of directors of Cerner Corporation,
Seafield Capital and SLH Corporation, all of which are public companies, and
serves on the board of directors of several private companies.
Irving S. Johnson joined the Board in May 1989. Dr. Johnson is an
independent consultant in biomedical research working with numerous private
companies. From 1953 until his retirement in November 1988, Dr. Johnson held
various positions at Eli Lilly and Company, including vice president of research
from 1973 until 1988. Dr. Johnson also served on several committees of the
National Academy of Sciences, the Office of Technology Assessment and the
National Institutes of Health. Currently, he is a member of the board of
directors of Allelix Biopharmaceuticals Inc. and Ligand Pharmaceuticals
Incorporated, and is on the scientific advisory board of ELAN Corporation, all
of which are public companies. Dr. Johnson received a Ph.D. in developmental
biology from the University of Kansas.
Antonie T. Knoppers joined the Board in July 1991. Dr. Knoppers is an
independent management consultant. From 1952 until his retirement in 1975, Dr.
Knoppers held various positions at Merck & Co., Inc., including vice chairman of
the board and president and chief operating officer. Dr. Knoppers is a member of
the board of directors of Centocor, Inc., a public biotechnology company. In
addition, he is a former chairman of the U.S. Council of the International
Chamber of Commerce and a member of the advisory board of PaineWebber
Development Corporation, an affiliate of PaineWebber Incorporated. Dr. Knoppers
received a M.D. from the University of Amsterdam and a Ph.D. from the University
of Leiden, The Netherlands.
33
<PAGE>
Melvin I. Simon, a founder of the Company, has served as a director since
its inception. Dr. Simon, a molecular geneticist, is a member of the National
Academy of Sciences. Currently, Dr. Simon is chairman of the Division of Biology
at the California Institute of Technology where he has been a member of the
faculty since 1982. Previously, Dr. Simon was a member of the faculty in the
Department of Biology at the University of California, San Diego. Dr. Simon
received a Ph.D. in biochemistry from Brandeis University. Dr. Simon also serves
as a director of The Agouron Institute.
Item 11. EXECUTIVE COMPENSATION
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required under Part III, Items 10 (in part), 11, 12 and 13
has been omitted from this report since the Company intends to file with the
Securities and Exchange Commission, not later than 120 days after the close of
its fiscal year, a definitive proxy statement prepared pursuant to Regulation
14A, which information is hereby incorporated by reference.
34
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this report:
(1) Financial Statements and Supplementary Data
Reference is made to the Index to Financial Statements and
Schedules under Item 8 in Part II hereof, where these
documents are listed.
(2) Exhibits - see (c) below
(b) Reports on Form 8-K
Two reports on Form 8-K were filed during the fourth quarter of fiscal
1997. The first, filed on May 5, 1997, reported the execution by the Company of
a Definitive Agreement to acquire Alanex Corporation. The second, filed on June
4, 1997, reported the closing on May 23, 1997 of the acquisition of Alanex
Corporation by the Company. Attached to this Form 8-K are the Alanex Corporation
balance sheet at December 31, 1996 and 1995, and the related statements of
operations, stockholders' equity and cash flows for the three years then ended
December 31, 1996.
(c) Exhibits
Exhibit
Number Exhibit
------- ---------------------------------------------------------
2.1(a) Agreement and Plan of Reorganization dated as of April 28,
1997, between Agouron Pharmaceuticals, Inc., Agouron
Acquisition Corporation and Alanex Corporation.
3.1(b) Restated Articles of Incorporation (December 10, 1992).
3.2(c) Amended and Restated Bylaws (Restated June 17, 1991).
4.1(d) Rights Agreement dated November 7, 1996, as amended on
November 27, 1996, between the Company and Chase Mellon
Shareholder Services. L.L.C., which includes, as Exhibit
A, the Certificate of Determination, Preferences and
Rights of Series B Participating Preferred Stock as filed
with the California Secretary of State on November 20,
1996.
10.01(e) Office Lease dated March 16, 1990 between Nexus Science
Centre--Torrey Pines Associates and the Company.
10.02(e) First Amendment to Lease dated May 22, 1990 between
Nexus Science Centre-Torrey Pines Associates and the
Company.
10.03(q) Form of 1990 Incentive Stock Option Agreement.
10.04(q) Form of 1990 Non-Statutory Stock Option Agreement for
Employees/Officers/Directors.
35
<PAGE>
Exhibit
Number Exhibit
------- ---------------------------------------------------------
10.05(q) Form of 1990 Non-Statutory Stock Option Agreement for
Consultants.
10.06(c) Second Amendment to Lease dated January, 1991 between
Nexus Science Centre-Torrey Pines Associates and the
Company
10.07(c) 1985 Stock Option Plan (Last Amended August 14, 1991).
10.08(f) Agouron Pharmaceuticals, Inc. 401(k) Plan (Amended August
1992).
10.09(b) Agouron Pharmaceuticals, Inc. Employee Stock Purchase Plan
(October 15, 1992).
10.10(b) Agouron Pharmaceuticals, Inc. Flexible Benefits Plan
(December 10, 1992).
10.11(g) Agreement dated June 8, 1993 between Syntex (U.S.A.) Inc.
and the Company. (Portions of the agreement receive
confidential treatment pursuant to an application filed
September 1, 1993; File No. 0-15609).
10.12(k) Lease Amendment dated February 17, 1994 between Koll
Hancock Torrey Pines and the Company.
10.13(h) Agreement Two dated February 28, 1994 between Japan
Tobacco Inc. and the Company.
(Portions of the agreement receive confidential treatment
pursuant to an application filed April 25, 1994; File No.
0-15609).
10.14(h) Agreement Three dated February 28, 1994 between Japan
Tobacco Inc. and the Company.
(Portions of the agreement receive confidential treatment
pursuant to an application filed April 25, 1994;
File No. 0-15609).
10.15(i) Second Amendment and Restatement of Agreement One dated
April 22, 1994 (effective December 18, 1992) between Japan
Tobacco Inc. and the Company. (Portions of the agreement
receive confidential treatment pursuant to an application
filed September 9, 1994; File No.
0-15609).
10.16(j) Development and License Agreement dated December 1, 1994
between Japan Tobacco Inc. and the Company (Portions of
the agreement receive confidential treatment pursuant to
an application dated January 31, 1995).
10.17(l) First Amendment to Development and License Agreement
effective December 1, 1994 between Japan Tobacco Inc. and
the Company. (Confidential treatment has been requested
for portions of this agreement pursuant to an application
dated January 31, 1996. The underlying agreement was filed
as Exhibit 10.54 on Form 10-Q for the period ended
December 31, 1994, and portions thereof receive
confidential treatment pursuant to an order of the
Securities and Exchange Commission dated June 28, 1995.)
10.18(j) Third Amendment of Agreement One effective January 15,
1995 between Japan Tobacco Inc. and the Company (Portions
of the agreement receive confidential treatment pursuant
to an application dated January 31, 1995).
10.19(k) Amended and Restated Lease dated September 13, 1995
between Health Science Properties, Inc. and the Company.
10.20(l) 1990 Stock Option Plan (Restated November 2, 1995).
10.21(m) Amendment effective January 1, 1996 to the Agouron
Pharmaceuticals, Inc. 401(k) Plan.
36
<PAGE>
Exhibit
Number Exhibit
------- ---------------------------------------------------------
10.22(m) First Amendment to Agreement Three effective February 29,
1996 between Japan Tobacco, Inc. and the Company.
10.23(n) Letter of Intent between Hoffmann-La Roche Inc. of Nutley,
New Jersey, F. Hoffmann-La Roche Ltd of Basel, Switzerland
(Roche) and the Company dated June 19, 1996. (Portions
of the Letter of Intent receive confidential treatment
pursuant to a request filed June 21, 1996.)
10.24(o) Sub-sublease dated July 24, 1996, between ITT Residential
Capital Serving Corporation and the Company.
10.25(q) Lease Amendment No. 3 dated October 16, 1996 between
John Hancock Life Insurance Company and the Company.
10.26(q) Lease dated October 25, 1996 between Scripps Jack, Ltd.
and the Company.
10.27(q) Sublease between The Scripps Research Institute and the
Company dated November 4, 1996.
10.28(q) Premises Modification Agreement dated November 4, 1996
between The Scripps Research Institute and the Company.
10.29(p) 1996 Stock Option Plan.
10.30(p) Form of 1996 Incentive Stock Option Agreement.
10.31(p) Form of 1996 Non-Statutory Stock Option Agreement for
Employees/Officers/Directors.
10.32(p) Form of 1996 Stock Option Agreement for Consultants
10.33 Lease dated November 8, 1996 between Scripps Jack, Ltd.
and the Company.
10.34 Third Amendment to Development and License Agreement
effective December 1, 1996 between Japan Tobacco Inc.
and the Company. (Confidential treatment has been
requested for portions of this agreement pursuant to
an application dated August 21, 1997, as separately filed
with the Securities and Exchange
Commission. The underlying agreement was filed as Exhibit
10.54 on Form 10-Q for the period ended December 31, 1994,
and portions thereof receive confidential treatment
pursuant to an order of the Securities and Exchange
Commission dated June 28, 1995.)
10.35 Second Amendment to Development and License Agreement
effective January 17, 1997 between Japan Tobacco Inc. and
the Company. (Confidential treatment has been requested
for portions of this agreement pursuant to an application
dated August 21, 1997, as separately filed with the
Securities and Exchange Commission. The underlying
agreement was filed as Exhibit 10.54 on Form 10-Q for the
period ended December 31, 1994, and portions thereof
receive confidential treatment pursuant to an order of the
Securities and Exchange Commission dated June 28, 1995.)
10.36(q) Letter of Intent between F. Hoffmann-La Roche Ltd of
Basel, Switzerland, Japan Tobacco Inc., and the Company
dated January 17, 1997. (Confidential treatment has been
requested for portions of this agreement pursuant to an
application dated January 27, 1997, as separately filed
with the Securities and Exchange Commission.)
37
<PAGE>
Exhibit
Number Exhibit
------- ---------------------------------------------------------
10.37 AG3340 Development and License Agreement between
F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc. and
the Company dated June 11, 1997. (Confidential treatment
has been requested for portions of this agreement
pursuant to an application dated August 21, 1997, as
separately filed with the Securities and Exchange
Commission.)
10.38 THYMITAQ Development and License Agreement between
F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc. and
the Company dated June 11, 1997. (Confidential treatment
has been requested for portions of this agreement
pursuant to an application dated August 21, 1997, as
separately filed with the Securities and Exchange
Commission.)
10.39 Lease dated June 13, 1997 between LMC-Sorrento Investment
Company, LLC and the Company.
10.40 VIRACEPT License Agreement between the Company and
Japan Tobacco Inc. and F. Hoffmann-La Roche Ltd dated
June 30, 1997. (Confidential treatment has been requested
for portions of this agreement pursuant to an application
dated August 21, 1997, as separately filed with the
Securities and Exchange Commission.)
21 Subsidiary of Agouron Pharmaceuticals, Inc.
23.1 Consent of Independent Accountants.
27 Financial Data Schedule. (Exhibit 27 is submitted as
an exhibit only in the electronic format of this
Annual Report on Form 10-K submitted to the Securities
and Exchange Commission.)
99 Important Factors Regarding Forward-Looking Statements.
- ---------------------
(a) Incorporated by Reference to Form 8-K filed on May 23, 1997.
(b) Incorporated by Reference to Form 10-Q filed for the quarter ended
December 31, 1992.
(c) Incorporated by Reference to Form 10-K filed for the year ended
June 30, 1991.
(d) Incorporated by Reference for Form 8-K/A filed on December 20, 1996,
File No. 001-12445.
(e) Incorporated by Reference to Form 8-K filed on May 25, 1990.
(f) Incorporated by Reference to Form 10-K filed for the year ended
June 30, 1992.
(g) Incorporated by Reference to Form 10-K filed for the year ended
June 30, 1993.
(h) Incorporated by Reference to Form 10-Q/A filed for the quarter ended
March 31, 1994.
(i) Incorporated by Reference to Form 10-K filed for the year ended
June 30, 1994.
(j) Incorporated by Reference to Form 10-Q filed for the quarter ended
December 31, 1994.
(k) Incorporated by Reference to Form 10-K filed for the year ended
June 30, 1995.
(l) Incorporated by Reference to Form 10-Q filed for the quarter ended
December 31, 1995.
(m) Incorporated by Reference to Form 10-Q filed for the quarter ended
March 31, 1996.
(n) Incorporated by Reference to Form 8-K filed on June 21, 1996.
(o) Incorporated by Reference to Form 10-K for the year ended June 30,
1996.
(p) Incorporated by Reference to Form S-8 filed on November 26, 1996,
File No. 333-16815.
(q) Incorporated by Reference to Form 10-Q for the quarter ended
December 31, 1996.
38
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AGOURON PHARMACEUTICALS, INC.
August 18, 1997 By: /s/ Peter Johnson
-------------------------------
Peter Johnson
President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Peter Johnson President, Chief Executive August 18, 1997
- ------------------------------------
Peter Johnson Officer and Director
/s/ Steven S. Cowell Corporate Vice President, Finance August 18, 1997
- ------------------------------------
Steven S. Cowell and Chief Financial Officer
/s/ Gary E. Friedman Corporate Vice President, August 18, 1997
- ------------------------------------
Gary E. Friedman General Counsel, Secretary
and Director
/s/ John N. Abelson Director August 18, 1997
- ------------------------------------
John N. Abelson, Ph.D.
/s/ Patricia M. Cloherty Director August 18, 1997
- ------------------------------------
Patricia M. Cloherty
/s/ A. E. Cohen Director August 18, 1997
- ------------------------------------
A. E. Cohen
/s/ Michael E. Herman Director August 18, 1997
- ------------------------------------
Michael E. Herman
/s/ Irving S. Johnson Director August 18, 1997
- ------------------------------------
Irving S. Johnson, Ph.D.
/s/ Antonie T. Knoppers Director August 18, 1997
- ------------------------------------
Antonie T. Knoppers, M.D.
/s/ Melvin I. Simon Director August 18, 1997
- ------------------------------------
Melvin I. Simon, Ph.D.
</TABLE>
39
================================================================================
STANDARD FORM LEASE
================================================================================
This Lease dated October 25, 1996 (this "Lease") is entered into by and
between Scripps Jack, Ltd., a California limited partnership ("Landlord") and
Agouron Pharmaceuticals, Inc., a California corporation ("Tenant").
ARTICLE I.
BASIC LEASE PROVISIONS
Each reference in this Lease to the "Basic Lease Provisions" shall mean
and refer to the following terms, the application of which shall be governed by
the provisions in the remaining Articles of this Lease:
1. Address of Landlord: Birtcher Property Services
27611 La Paz Road, Laguna Niguel, CA 92677
with a copy to Scripps Jack, Ltd., P.O.
Box 614, Bloomington, Illinois, 61702,
Attn: Real Estate Services
2. Premises Address: 4245 Sorrento Valley Boulevard
San Diego, Ca 92121
3. Address of Tenant:
(a) Notices: 4245 Sorrento Valley Boulevard
San Diego, California, 92121
(b) Billing: Agouron Pharmaceuticals, Inc.
10350 North Torrey Pines Road
La Jolla, California, 92037-1020
4. Tenant's Trade Name: Agouron Pharmaceuticals, Inc.
5. Tenant's Contact: Glenn Zinser Telephone: (619) 622-3005
6. Premises Square Footage: Both the Premises and the Building consist of
approximately 22,843 square feet of gross building area ("Square Feet
of Gross Building Area"). The exact number of Square Feet of Gross
Building Area in the Premises and the Building shall be determined as
set forth in Section 2.1 below.
7. Commencement Date: See Section 3.2
8. Term: From the Commencement Date through December 31,2001
9. Initial Monthly Rent: The initial Monthly Rent payable by Tenant to
Landlord shall be One and 45/100 Dollars ($1.45) per square foot per
month of Square Feet of Gross Building Area within the Premises,
subject to adjustment pursuant to Exhibit E attached hereto.
Accordingly, the approximate amount of the initial Monthly
Rent shall be Thirty Three-Thousand One Hundred Twenty Two and 35/100
Dollars ($33,122.35). In the event the Square Feet of Gross Building
Area in the Premises as determined in accordance with Section 2.1
differs from the approximate amount of Square Feet of Gross Building
Area set forth in Item 6 of the Basic Lease Provisions, Landlord and
Tenant agree to promptly execute an amendment to this Lease which
revises the amounts of Minimum Rent provided herein and in Exhibit E.
Additionally, to the extent that Tenant has overpaid Monthly Rent
for the period from the Commencement Date until the end of the month
in which the determination of the Rentable Square Feet of Floor
Area of the Premises pursuant to Section 2.1 is made, Landlord shall
immediately reimburse Tenant therefore. Similarly, to the extent
that Tenant has underpaid Landlord Monthly Rent for such period,
Tenant shall immediately pay Landlord such there shall be no
underpayment.
10. Security Deposit: $35,000.00
11. Permitted Uses: Biotech research and development and related
pharmaceutical operations, pursuant to approvals to be obtained by
Tenant from all relevant City, County and other required governmental
agencies and authorities.
12. Broker: Landlord's Broker - C.B. Commercial Real Estate Group, Inc.
Tenant's Broker - Colliers Iliff Thorn
13. Landlord's Architect: Carrier Design Group, Inc.
14. Guarantor: None
15. Vehicle Parking Spaces: Seventy (70)
16. Additional Insureds: Birtcher Property Services and Scripps Jack,
Ltd.
17. Tenant's Liability Insurance Limits: $10,000,000.00
18. Tenant's Share: 100%
-1-
<PAGE>
Exhibits:
A Description of Premises
B Property Description
C Work Letter
D Commencement Date Memorandum
E Adjustments to Monthly Rent
F Rules and Regulations
G Environmental Questionnaire
Riders:
Rider No.1 to Lease
-2-
<PAGE>
ARTICLE II
DEFINITIONS
2.1 Certain Definitions. The capitalized terms set forth below, unless
the context clearly requires otherwise, shall have the following meanings in
this Lease:
"Additional Rent" means any and all sums (whether or not
specifically called "Additional Rent" in this Lease) other than Monthly Rent
which Tenant is or becomes obligated to pay to Landlord under this Lease. See
also Rent.
"Alterations" means any alterations, decorations, modifications,
additions or improvements made in, on, about, under or contiguous to the
Building or the Premises after the Commencement Date including, but not limited
to, lighting, HVAC and electrical fixtures, pipes and conduits, transfer,
storage and disposal facilities, partitions, drapery, wall coverings, shelves,
cabinetwork, carpeting and other floor coverings, ceiling tiles, fixtures and
carpentry installations.
"Applicable Laws" means the laws, rules, regulations, ordinances,
restrictions, and practices described in Section 5.2.
"Applicable Rate" means the greater of ten percent (10%) per annum
or five percent (5%) in excess of the discount rate of the Federal Reserve Bank
of San Francisco in effect on the twenty-fifth (25th) day of the calendar month
immediately prior to the event giving rise to the Applicable Rate imposition;
provided, however, the Applicable Rate shall in no event exceed the maximum
interest rate permitted to be charged by applicable law.
"Broker" means the person or entity identified in Item 12 of the
Basic Lease Provisions.
"Building" means that certain building within which the Premises
are located.
"Casualty" is defined in Section 12.1.
"City" means the city in which the Premises are located.
"Commencement Date" means the commencement date of the Term,
described in Section 3.2.
"Common Area" means all areas and facilities within the Project
exclusive of the Premises and other portions of the Project leased (or to be
leased) exclusively to other tenants. The Common Area includes, but is not
limited to, parking areas, access and perimeter roads, sidewalk, landscaped
areas and similar areas and facilities. Tenant's use of the Common Area, and its
rights and obligations with respect thereto, are more particularly described in
Article X.
"County" means the county in which the Premises are located.
"Event of Default" means the Tenant defaults described in
Section15.1.
"Guarantor" means the person(s) or entity identified in Item 14 of
the Basic Lease Provisions, if any.
"HVAC" means the heating, ventilating and air conditioning system
serving the Building.
"Hazardous Materials" is defined in Section 6.1.
"Landlord's Agents" means Landlord's authorized agents,
representatives, property managers (whether as agents or independent
contractors), consultants, contractors, partners, subsidiaries, affiliates,
directors, officers and employees, including without limitation the Additional
Insureds named in Item 16 of the Basic Lease Provisions.
"Landlord's Architect" means the architect or architectural firm
from time to time designated by Landlord to perform the function of Landlord's
Architect set forth in this Lease. Landlord's Architect initially shall be the
architect or architectural firm designated in Item 13 of the Basic Lease
Provisions.
"Lease" means this instrument together with all exhibits,
amendments, addenda and riders attached hereto and made a part hereof.
"Monthly Rent" means the monthly rental which Tenant is to pay to
Landlord pursuant to Section 4.1, as the same may be adjusted from time to time
as set forth in this Lease. See also Rent.
"Mortgage" means any mortgage, deed of trust, or similar lien on or
covering the Project or any part thereof.
"Mortgagee" means any mortgagee of a mortgage, beneficiary of a
deed of trust or lender having a lien on or covering the Project or any part
thereof.
"Notice" means each and every notice, communication, request,
demand, reply or advice, or duplicate thereof, in this Lease provided or
permitted to be given, made or accepted by either party to any other party,
which shall be in writing and given in accordance with the provisions of Section
21.6.
-3-
<PAGE>
"Operating Expenses" means, collectively, Project Costs and Real
Property Taxes.
"Plans" means the final working drawings for the construction of
the Tenant Improvements to be prepared and approved as set forth in the Work
Letter.
"Outside Areas" means the areas outside the exterior walls of the
Building.
"Premises" means the premises shown in Exhibit A, and all areas
appurtenant thereto, if any, for the exclusive use of Tenant, as shown in
ExhibitA. The Premises are located within and constitute the Building at the
address set forth in Item 2 of the Basic Lease Provisions.
"Premises Square Footage" means the floor area of both the Premises
and the Building. Upon substantial completion of the Premises, Landlord's
architect or another appropriate professional shall certify the total Square
Feet of Gross Building Area in the Premises and the Building based upon the BOMA
Gross Building Area standard of measurement.
"Project" means that certain real property, and all
improvements thereon, including the Building and other buildings, if any,
located within the boundaries of such property, described in the Property
Description.
"Project Costs" is defined in Section 7.3.
"Property Description" means Exhibit B.
"Real Property Taxes" is defined in Section 7.4.
"Rent" means Monthly Rent and Additional Rent, collectively.
"Rules and Regulations" means the rules and regulations attached
hereto as Exhibit F and any modifications thereto promulgated by Landlord or
Landlord's Agents from time to time.
"Security Deposit" means the amount set forth in Item 10 of the
Basic Lease Provisions, which shall be paid to Landlord by Tenant pursuant to
Section4.6.
"Substantial Completion" and "substantially completed" means the
date on which the repair of the Premises following a Casualty, have been fully
completed except for minor details of construction, mechanical adjustments or
decoration which do not materially interfere with Tenant's use and enjoyment of
the Premises (items normally referred to as "punch list" items).
"Tenant Delays" means any and all delays due to the fault of the
Tenant, but only to the extent caused by such default, including without
limitation Tenant's failure to deliver to Landlord prior to the Commencement
Date, executed copies of policies of insurance or certificates thereof as
required under Section 11.8.
"Tenant Improvements" means those certain improvements, if any, to
be constructed on the Premises as provided in Article XX and in the Work Letter.
"Tenant's Agents" means Tenant's agents, representatives,
consultants, contractors, affiliates, subsidiaries, officers, directors,
employees, subtenants, guests and invitees.
"Tenant's Personal Property" means Tenant's removable trade
fixtures, furniture, equipment and other personal property located in or on the
Premises.
"Term" means the term of this Lease, as provided in Section 3.2.
"Unavoidable Delay" means any delays which are beyond a party's
reasonable control including, but not limited to, delays due to inclement
weather, strikes, acts of God, inability to obtain labor or materials, inability
to secure governmental approvals or permits, governmental restrictions, civil
commotion, fire, earthquake, explosion, flood, hurricane, the elements, or the
public enemy, action or interference of governmental authorities or agents, war
invasion, insurrection, rebellion, riots, lockouts or any other cause whether
similar or dissimilar to the foregoing which is beyond a party's reasonable
control; provided however, that in no event shall any of the foregoing ever
apply with respect to the payment of any monetary obligation.
"Work Letter" means the work letter between Landlord and Tenant
regarding the construction of the Tenant Improvements, if any, in the form of
Exhibit C.
2.2 Other Definitions. Terms defined elsewhere in this Lease,
unless the context clearly requires otherwise, shall have the meaning as there
given.
-4-
<PAGE>
ARTICLE III
PREMISES AND TERM
3.1 Lease of Premises. Subject to and upon the terms and conditions set
forth herein, Landlord hereby leases the Premises to Tenant, and Tenant hereby
leases the Premises from Landlord.
3.2 Terms and Commencement. Unless sooner terminated as provided
herein, the Term of this Lease shall be for that period of years and months set
forth in Item8 of the Basic Lease Provisions, as the same may be extended in
accordance with any option or options to extend the Term granted herein, and
shall commence (the "Commencement Date") on the earlier of (i) the later to
occur of May 15,1997 or two-hundred ten (210) days after Landlord delivers
possession of the Premises to Tenant or (ii) the date that Tenant is issued a
certificate of occupancy or temporary certificate of occupancy by the City of
San Diego. When the actual Commencement Date has occurred, Landlord and Tenant
shall execute a Commencement Date Memorandum in the form shown in Exhibit D.
3.3 Early Entry. Tenant and its authorized agents, contractors,
subcontractors and employees shall be granted a license by Landlord to enter
upon the Premises, at Tenant's sole risk and expense, during ordinary business
hours prior to the Commencement Date, for the sole purpose of installing
Tenant's trade fixtures and equipment in the Premises; provided, however, that
(i) the provisions of this Lease, other than with respect to the payment of
Monthly Rent, shall apply during such early entry including, but not limited to,
the provisions of ArticleXI relating to Tenant's indemnification of Landlord,
(ii)prior to any such entry, Tenant shall pay for and provide evidence of the
insurance to be provided by Tenant pursuant to the provisions of ArticleXI,
(iii)Tenant shall pay all utility, service and maintenance charges for the
Premises attributable to Tenant's early entry and use of the Premises as
reasonably determined by Landlord, (iv)Tenant shall not unreasonably interfere,
delay or hinder Landlord, its agents, contractors or subcontractors in the
construction of the Tenant Improvements in accordance with the provisions of
this Lease, and (v)Tenant shall not use the Premises for the storage of
inventory or otherwise commence the operation of business during the period of
such early entry. Upon Tenant's breach of any of the foregoing conditions,
Landlord may, in addition to exercising any of its other rights and remedies set
forth herein, revoke such license upon notice to Tenant. Early entry by Tenant
in accordance with this Section3.3 shall not constitute occupancy of the
Premises for purposes of establishing the Commencement Date.
3.4 Delay in Possession. If for any reason Landlord cannot deliver
possession of the Premises to Tenant on or before the Commencement Date,
Landlord shall not be subject to any liability therefor, and such failure shall
not affect the validity of this Lease or the obligations of Tenant hereunder,
but in such case, Tenant shall not be obligated to pay Monthly Rent or
Additional Rent other than as provided in Section3.3 and Section3.5 until the
Commencement Date as defined in Section 3.2 above, has occurred. If Landlord
does not deliver possession of the Premises to Tenant within ten (10) days
following the full execution of the Lease by Landlord and Tenant plus periods
attributable to Tenant Delays or Unavoidable Delay, Tenant may, at its option,
by Notice to Landlord within ten (10) days thereafter, terminate this Lease, in
which event the parties shall be discharged from all further obligations
hereunder; provided, however, if Tenant fails to give such notice to Landlord
within such ten-day period, Tenant shall no longer have the right to terminate
this Lease under this Section3.4. Tenant understands that, notwithstanding
anything to the contrary contained herein, Landlord shall have no obligation to
deliver possession of the Premises to Tenant for so long as Tenant fails to
deliver to Landlord executed copies of policies of insurance or certificates
thereof as required under Section11.8.
3.5 Tenant Delays. The Commencement Date shall not be delayed or
postponed due to Tenant Delays, and the Term, Tenant's obligations to pay Rent
and all of Tenant's other obligations under this Lease shall commence upon the
date which would have been the Commencement Date but for Tenant Delays.
3.6 Condition of Premises. Landlord's sole construction obligations, if
any, regarding Tenant Improvements for the Premises are set forth in ArticleXX
and the Work Letter. The taking of possession or use of the Premises by Tenant
for any purpose other than as provided in Section3.3 shall conclusively
establish that Tenant has inspected the Premises and accepts them as being in
good and sanitary order, condition and repair, except for latent structural
structural defects and Landlord's maintenance obligations set forth in Article
IX.
3.7 No Representations. Tenant acknowledges that neither Landlord nor
any of Landlord's Agents has made any representations or warranties as to the
suitability or fitness of the Premises for the conduct of Tenant's business
including, but not limited to, any representations or warranties regarding
zoning or other land use matters, or for any other purpose, and that neither
Landlord nor any of Landlord's Agents has agreed to undertake any alterations or
additions or construct any Tenant Improvements to the Premises except as
expressly provided in this Lease. Landlord is not aware of any restrictions that
would adversely affect the Permitted Uses contemplated in this Lease.
ARTICLE IV
RENT AND ADJUSTMENTS
4.1 Monthly Rent. From and after the Commencement Date, Tenant shall
pay to the Landlord, for each calendar month of the Term, the Monthly Rent set
forth in Item9 of the Basic Lease Provisions, as the same may be adjusted from
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time to time as provided in Section4.2. Monthly Rent shall be due and payable to
Landlord in lawful money of the United States, in advance, on the first (1st)
day of each calendar month of the Term, without abatement, deduction, claim or
offset, and without prior notice, invoice or demand, at Landlord's address set
forth in Item1 of the Basic Lease Provisions or at such place as Landlord may
from time to time designate. Tenant's payment of Monthly Rent for the first
(1st) month of the Term shall be delivered to Landlord concurrently with
Tenant's execution of this Lease.
4.2 Adjustments. Monthly Rent shall be adjusted from time to time as
provided in Exhibit E.
4.3 Additional Rent. All Additional Rent shall be due and payable to
Landlord in lawful money of the United States, at Landlord's address set forth
in Item1 of the Basic Lease Provisions or at such other place as Landlord may
from time to time designate, without abatement, deduction, claim or offset,
within ten (10) days of receipt of Landlord's invoice or statement for same, or
if this Lease provides another time for the payment of certain items of
Additional Rent, then at such other time.
4.4 Prorations. If the Commencement Date is not the first (1st) day of
a month, or if the expiration of the Term of this Lease is not the last day of a
month, a prorated installment of Monthly Rent based on a thirty (30) day month
shall be paid for the fractional month during which the Term commences or
terminates.
4.5 Late Payment Charges. Tenant acknowledges that late payment by
Tenant to Landlord of Rent under this Lease will cause Landlord to incur costs
not contemplated by this Lease, the exact amount of which is extremely difficult
or impracticable to determine. Such costs include, but are not limited to,
processing and accounting charges, late charges that may be imposed on Landlord
by the terms of any Mortgage, and late charges and penalties that may be imposed
due to late payment of Real Property Taxes. Therefore, if any installment of
Monthly Rent or any payment of Additional Rent due from Tenant is not received
by Landlord in good funds by the tenth (10) calendar day from the applicable due
date, Tenant shall pay to Landlord an additional sum equal to the lesser of One
Thousand Dollars ($1,000.00) or three percent (3%) of the amount overdue as a
late charge for every month or portion thereof that such amount remains unpaid.
The parties acknowledge that this late charge presents a fair and reasonable
estimate of the costs that Landlord will incur by reason of the late payment by
Tenant. Acceptance of any late Rent and late charge therefor shall not prevent
Landlord from exercising any of the other rights and remedies available to
Landlord for any other Event of Default under this Lease. Notwithstanding the
foregoing (i) should any payment of Rent by personal check be rejected for
insufficient funds, Landlord shall have the right, upon notice to Tenant, to
require that all future payments by Tenant under this Lease be by cashier's
check acceptable to Landlord, and (ii)upon the third (3rd) occurrence during the
Term of Tenant's failure to timely pay Rent when due, Landlord may, upon notice
to Tenant, require that Monthly Rent for the balance of the Term be made in
quarterly installments, in advance, in an amount equal to the sum of the Monthly
Rent amounts payable during such three (3) month period.
4.6 Security Deposit. Tenant has deposited with Landlord the sum set
forth in Item10 of the Basic Lease Provisions as a Security Deposit for the full
and faithful performance of every provision of this Lease to be performed by
Tenant. Upon an uncured Event of Default, and whether or not Landlord is
informed of or has knowledged of the event of Default, the Security Deposit
shall be deemed to be automatically applied, without waiver of any rights
Landlord may have under this Lease or at law or in equity as a result of an
Event of Default, to the payment of any Rent not paid when due, the repair of
damage to the Premises or the payment of any other amount which Landlord may
spend or become obligated to spend by reason of an Event of Default, to the full
extent permitted by law. If any portion of the Security Deposit is so applied,
Tenant shall, within ten (10) days after written demand therefor, deposit cash
with Landlord in an amount sufficient to restore the Security Deposit to its
original amount. Landlord shall not be required to keep the Security Deposit
separate from its general funds. The unused portion of the Security Deposit, if
any, shall be returned to Tenant within thirty (30) days of the expiration of
this Lease or any termination of this Lease not resulting from an Event of
Default, so long as Tenant has vacated the Premises in the manner required by
this Lease and paid all sums required to be paid under this Lease, provided
however, that Landlord may retain the Security Deposit until such time as any
amounts of Additional Rent due from Tenant have been determined and paid in
full. Tenant hereby waives the provisions of Section1950.7(c) of the California
Civil Code and any present or future laws otherwise governing the return of the
Security Deposit to Tenant to the extent of reasonably anticipated Additional
Rent retained by Landlord pursuant to the previous sentence.
ARTICLE V
USE
5.1 Tenant's Use. Tenant shall use the Premises solely for the purposes
set forth in Item11 of the Basic Lease Provisions and shall use the Premises for
no other purpose. Tenant's use of the Premises shall be subject to all of the
terms and conditions of this Lease including, but not limited to, all the
provisions of this ArticleV. Tenant, at Tenant's sole cost and expense, shall
procure, maintain and make available for Landlord's inspection throughout the
Term, all governmental approvals, licenses and permits required for the proper
and lawful conduct of Tenant's permitted use of the Premises. At Landlord's
request, Tenant shall deliver copies of all such approvals, licenses and permits
to Landlord.
5.2 Compliance With Applicable Laws. Throughout the Term, Tenant, at
Tenant's sole cost and expense, shall comply with, and shall not use the
Premises, Building or Common Area, or suffer or permit anything to be done in or
about the same which will in any way conflict with, (i) any and all present and
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future laws, statutes, zoning restrictions, ordinances, orders, regulations,
directions, rules and requirements of all governmental or private authorities
having jurisdiction over all or any part o the Premises (including, but not
limited to, state, municipal, county and federal governments and their
departments, bureaus, boards and officials) pertaining to the use or occupancy
of, or applicable to, the Premises or privileges appurtenant to or in connection
with the enjoyment of the Premises, (ii)any and all applicable federal, state
and local laws, regulations or ordinances pertaining to air and water quality,
Hazardous Materials (as defined in Section6.1), waste disposal, air emissions
and other environmental or health and safety matters, zoning, land use and
utility availability, which impose any duty upon Landlord or Tenant directly or
with respect to the use or occupation of the Project or any portion thereof,
(iii)the requirements of the Board of Fire Underwriters or other similar body
now or hereafter constituted relating to or affecting the condition, use or
occupancy of the Project or any portion thereof, (iv)any covenants, conditions,
easements or restrictions now or hereafter affecting or encumbering the Project
or any portion thereof, regardless of when they become effective, (v)the Rules
and Regulations, and (vi)good business practices (collectively, (i) through (vi)
above are hereinafter referred to as "Applicable Laws"). Tenant shall not commit
any waste of the Premises, Building or Project, or any public or private
nuisance or any other act or thing which might or would disturb the quiet
enjoyment of any other tenant of Landlord or any occupant of nearby property.
Tenant shall not place or permit to be placed any loads upon the floors, walls
or ceilings in excess of the maximum designed load specified by Landlord or
which might damage the Premises or the Building, or place or permit to be placed
any liquids in levels in excess of applicable laws or regulations in the
drainage systems, and Tenant shall not dump or store, or permit to be dumped for
stored, any inventory, waste materials, refuse or other materials or allow any
such materials to remain outside the Building proper, except in designated
enclosed trash areas. Tenant shall not conduct or permit any auctions, sheriff's
sales or other like activities at the Project or any portion thereof.
5.3 Restrictions. Tenant agrees that it will subordinate this Lease to
any other covenants, conditions and restrictions and any reciprocal easement
agreements or any similar agreements which Landlord may hereafter record against
the Premises and to any amendment or modification to any of the existing
Restrictions, provided that such subordination does not unreasonably interfere
with Tenant's use and enjoyment of the Premises, adversely affect Tenant's
rights, or increase the monetary or other obligations of Tenant under this
Lease.
5.4 Landlord's Right of Entry. Landlord and Landlord's Agents shall
have the right to enter the Premises at all reasonable times upon reasonable
notice to Tenant, except for emergencies in which case no notice shall be
required, to inspect the Premises, to take samples and conduct environmental
investigations, to post notices of nonresponsibility and similar notices and
signs indicating the availability of the Premises for sale, to show the Premises
to interested parties such as prospective lenders and purchasers, to make
necessary Alterations or maintenance and repairs, to perform Tenant's
obligations as permitted herein when Tenant has failed to do so and, at any
reasonable time after one hundred eighty (180) days prior to the expiration of
the Term, to place upon the Premises reasonable signs indicating the
availability of the Premises for lease and to show the Premises to prospective
tenants, all without being deemed to have caused an eviction of Tenant and
without any liability to Tenant or abatement of Rent. The above rights are
subject to reasonable security regulations of Tenant, and in exercising its
rights set forth herein, Landlord shall endeavor to cause the least possible
interference with Tenant's business. Landlord shall at all times have the right
to retain a key which unlocks all of the doors in the Premises, excluding
Tenant's vaults and safes, and Landlord and Landlord's Agents shall have the
right to use any and all means which Landlord may deem proper to open the doors
in an emergency to obtain entry to the Premises, and any entry to the Premises
so obtained by Landlord or Landlord's Agents shall not be deemed to be a
forcible or unlawful entry into, or a detainer of, the Premises, or an eviction
of Tenant from the Premises if conducted reasonably in accordance with the terms
of this Lease.
ARTICLE VI
HAZARDOUS MATERIALS
6.1 Definition of Hazardous Materials. For purposes of this Lease, the
term "Hazardous Materials" includes (i) any "hazardous materials" as defined in
Section25501(k) of the California Health and Safety Code unless Tenant
establishes, to the satisfaction of Landlord, that because of the quantity,
concentration, or physical or chemical characteristics, such substance or matter
does not pose a present or potential hazard to human health and safety or to the
environment, (ii)any other substance or matter which results in liability to any
person or entity from exposure to which substance or matter under any statutory
or common law theory, and (iii)any substance or matter which is in excess of
relevant and appropriate levels set forth in any applicable federal, state or
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local law or regulation pertaining to any hazardous or toxic substance, material
or waste, or for which any applicable federal, state or local agency orders or
otherwise requires removal, treatment or remediation.
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6.2 Prohibition/Compliance. Tenant shall not cause or permit any
Hazardous Material (as hereinafter defined) to be brought upon, kept or used in
or about the Premises or the Project in violation of applicable law by Tenant,
its agents, employees, contractors or invitees. If Tenant breaches the
obligation stated in the preceding sentence, or if the presence of Hazardous
Materials results in unlawful contamination of the Premises, the Building, the
Project or any adjacent property or if unlawful contamination of the Premises,
the Building, the Project or any adjacent property by Hazardous Material
otherwise occurs during the term of this Lease or any extension or renewal
hereof or holding over hereunder, then Tenant shall indemnify, defend and hold
Landlord, its agents and contractors harmless from any and all claims,
judgments, damages penalties, fines, costs, liabilities or losses (including
without limitation diminution in value of the Premises or any portion of the
Project, damages for the loss or restriction on use of rentable or usable space
or of any amenity of the Premises or Project, damages arising from any adverse
impact on marketing of space in the Premises or the Project, and sums paid in
settlement of claims, attorneys' fees, consultant fees and expert fees) which
arise during or after the Lease term as a result of such contamination. For the
purpose of this Section 6.2, unlawful contamination is Hazardous Material which
violates any applicable local, state or federal laws or any regulations or
standards promulgated thereunder, including requirements or standards imposed by
any governmental agency or by governmental order or court having jurisdiction
over the Project. This indemnification of Landlord by Tenant includes, without
limitation, costs incurred in connection with any investigation of site
conditions of any cleanup, remedial, removal, or restoration work required by
any federal, state or local governmental agency or political subdivision because
of Hazardous Material present in the air, soil or ground water above on or under
the Premises. Without limiting the foregoing, if the presence of any Hazardous
Material on the Premises, the Building, the Project or any adjacent property,
caused or permitted by Tenant results in any unlawful contamination of the
Premises, the Building, the Project or any adjacent property, Tenant shall
promptly take all actions at its sole expense as are necessary to ensure the
Premises, the Building, the Project or any adjacent property meets all
applicable local, state and federal laws and any regulations or standards
promulgated thereunder, in effect now or in the future, including requirements
by any governmental agency or imposed by any governmental order or court having
jurisdiction over the project, provided that Landlord's approval of such action
shall first be obtained, which approval shall not unreasonably be withheld so
long as such actions would not potentially have any material adverse long-term
or short-term effect on the Premises, the Building or the Project.
6.3 Business. Landlord acknowledges that it is not the intent of this
Article 6 to prohibit Tenant from operating its business as described in Item 11
of the Basic Lease Provisions above. Tenant may operate its business according
to the custom of the industry so long as the use or presence of Hazardous
Material is strictly and properly monitored according to all applicable
governmental requirements. As a material inducement to Landlord to allow Tenant
to use Hazardous Material in connection with its business, Tenant agrees to
deliver to Landlord prior to the Commencement Date a list identifying each type
of Hazardous Material to be present on the Premises and setting forth any and
all governmental approvals or permits required in connection with the presence
of such Hazardous Material on the Premises ("Hazardous Material List"). Tenant
shall deliver to Landlord an updated Hazardous Material List at least once a
year. Tenant shall deliver to Landlord true and correct copies of the following
documents (hereinafter referred to as the "Documents") relating to the handling,
storage, disposal and emission of Hazardous Material prior to the Commencement
Date, or if unavailable at the time, concurrent with the receipt from or
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submission to a governmental agency: permits; approvals; reports and
correspondence; storage and management plans, notice of violations of any laws;
plans relating to the installation of any storage tanks to be installed in or
under the Project (provided, said installation of tanks shall only be permitted
after Landlord has given Tenant its written consent to do so, which consent may
be withheld in Landlord's sole and absolute discretion); and all closure plans
or any other documents required by any and all federal, state and local
governmental agencies and authorities for any storage tanks installed in, on or
under the Project for the closure of any such tanks. Tenant is not required,
however, to provide Landlord with any portion(s) of the Documents containing
information of a proprietary nature which, in and of themselves, do not contain
a reference to any Hazardous Material or hazardous activities. It is not the
intent of this Section to provide Landlord with information which could be
detrimental to Tenant's business should such information become possessed by
Tenant's competitors.
6.4 Termination of Lease. Notwithstanding the provisions of Section 6.2
above, if Tenant or the proposed assignee or sublessee is subject to an
enforcement order issued by any governmental authority in connection with the
use, disposal or storage of a Hazardous Material at the Project, Landlord shall
have the right to terminate the Lease in Landlord's sole and absolute discretion
(with respect to any such matter involving Tenant) and it shall not be
unreasonable for Landlord to withhold its consent to any proposed assignment or
subletting (with respect to any such matter involving a proposed assignee or
sublessee).
6.5 Testing. At reasonable times, and from time to time, prior to the
expiration of the Term Landlord shall have the right at its own expense to
conduct appropriate investigations and tests of the Premises, Building and
Project to demonstrate that unlawful contamination has occurred as a result of
Tenant's use of the Premises. Tenant shall be responsible for the cost of any
investigations and tests which indicate that unlawful contamination resulted
from Tenant's use of the Premises. Tenant shall be solely responsible for and
shall defend, indemnify and hold the Landlord, its agents and contractors
harmless from an against any and all claims, costs and liabilities including
actual attorneys' fees and costs, arising out of or in connection with any
removal, clean up, restoration and materials required hereunder to ensure the
Premises and any other property of whatever nature, meets all applicable local,
state and federal laws and any regulations or standards promulgated thereunder,
in effect now or in the future, including requirements by any governmental
agency or imposed by any governmental order or court having jurisdiction over
the project. Tenant shall pay for the cost of a third party prepared Phase I
exit audit of the Premises at the termination of the Leases plus the cost of any
tests or remediations reasonably recommended in said audit to bring any Tenant
caused contamination to meet all applicable local, state and federal laws and
any regulations or standards promulgated thereunder, in effect now or in the
future, including requirements by any governmental agency or imposed by any
governmental order or court having jurisdiction over the Project.
6.6 Tenant's Responsibility at Conclusion of Lease. Promptly upon the
expiration or sooner termination of this Lease, Tenant shall certify to Landlord
in writing that (i)Tenant has made a diligent effort to determine whether any
Hazardous Materials are on, under or about the Premises as a result of any acts
or omissions or Tenant or Tenant's Agents and (ii)no such Hazardous Materials
exist on, under or about the Premises other than as specifically identified to
Landlord by Tenant in writing. In addition, Tenant shall provide Landlord with
independent verification (acceptable to Landlord) that (i) all permits, reports,
closure or decertification procedures, if applicable, have been secured or
satisfied by Tenant for its discontinuance of use of the Premises under this
Lease and (ii) the interior of the Premises is free of contamination by
Hazardous Materials. If Tenant or its independent verification discloses the
existence of Hazardous Materials on, under or about the Premises, or if Landlord
at any time discovers that Tenant or Tenant's Agents caused or permitted the
release of a Hazardous Material on, under, from or about the Premises, Tenant
shall, at Landlord's request, immediately prepare and submit to Landlord within
thirty (30) days after such request a comprehensive plan, subject to Landlord's
approval, specifying the actions to be taken by Tenant to return the Premises to
the condition existing prior to the introduction of such Hazardous Materials.
Upon Landlord's approval of such cleanup plan, Tenant shall, at Tenant's sole
cost and expense, without limitation on any rights and remedies of Landlord
under this Lease or at law or in equity, immediately implement such plan and
proceed to clean up such Hazardous Materials in accordance with all Applicable
Laws and as required by such plan and this Lease.
ARTICLE VII
OPERATING EXPENSES; TAXES; UTILITIES
7 1. Payment of Maintenance Expenses. Prior to the Commencement Date
and thereafter prior to the commencement of each of Landlord's fiscal years
during the Term, Landlord shall give Tenant a written estimate based on
generally accepted accounting principles of Maintenance Expenses (hereafter
defined) for the ensuing fiscal year or partial fiscal year as the case may be.
Tenant shall pay, as an item of Additional Rent such estimated amount in equal
monthly installments, in advance, on or before the first (1st) day of each
calendar month concurrent with its payment of Monthly Rent. If Landlord has not
furnished its written estimate by the time set forth above, Tenant shall pay
monthly installments of Maintenance Expenses at the rate established for the
prior fiscal year, if any; provided that when the new estimate is delivered to
Tenant, Tenant shall (provided it is given not less than thirty (30) days prior
written notice) at the next monthly payment date pay Landlord any accrued
deficiency based on the new estimate, or Landlord shall credit any accrued
overpayment based on such estimate toward Tenant's next installment payment
hereunder. Within a reasonable period of time after the end of each fiscal year
(in no event more than one hundred (120) days after the end of each fiscal year
unless sooner completed by Landlord) Landlord shall furnish Tenant a statement
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showing in reasonable detail the actual Maintenance Expenses incurred for the
period in question. If Tenant's estimated payments are less than the actual
Maintenance Expenses as shown by the applicable statement, Tenant shall pay the
difference to Landlord within thirty (30) days thereafter. If Tenant shall have
overpaid Landlord, Landlord shall credit such overpayment toward Tenant's next
installment payment hereunder or if in the last year of the Lease Term and at
Tenant's option, refund such overpayment within 30 days thereafter. When the
final determination is made of the actual Maintenance Expenses for the fiscal
year in which this Lease terminates, Tenant shall, even if this Lease has
terminated, pay to Landlord within thirty (30) days after notice the excess of
such actual Maintenance Expenses over the estimate of Maintenance Expenses paid.
Conversely, any overpayment shall be rebated by Landlord to Tenant within 30
days. If Landlord shall determine at any time that the estimate of Maintenance
Expenses for the current fiscal year is or will become inadequate to meet all
such Maintenance Expenses for any reason, Landlord shall immediately determine
the approximate amount of such inadequacy and issue a supplemental estimate
based on generally accepted accounting principles as to such Maintenance
Expenses and Tenant shall pay any increase as reflected by such supplemental
estimate, provided it is given not less than 20 days prior written notice.
Landlord shall keep or cause to be kept separate and complete books of
accounting covering all Maintenance Expenses, and shall preserve for at least
twenty-four (24) months after the close of each fiscal year all material
documents evidencing said Maintenance Expenses for that fiscal year. Tenant, at
its sole cost and expense, through any certified public accountant designated by
it, or by Tenant's or Tenant's parents financial analysis department, shall have
the right, during reasonable business hours and not more frequently than twice
during any fiscal year, to examine and/or audit the books and documents
mentioned above evidencing such costs and expenses for the previous fiscal year.
Any delay or failure by Landlord in delivering any estimate or statement
pursuant to this Section 7.1 shall not constitute a waiver of its right to
require Tenant to pay all Maintenance Expenses pursuant hereto, unless such
failure continues for a period in excess of twelve (12) months.
7.2 Definition of Maintenance Expenses. The term "Maintenance Expenses"
means all reasonable direct costs and expenses incurred by Landlord or
Landlord's Agents in connection with the operation, maintenance and repair of
the Outside Areas, including, but not limited to, the following: actual costs
and expenses incurred in connection with labor and materials utilized in the
performance of Landlord's maintenance and repair obligations pursuant to Section
9.1; any and all assessments levied against the Premises or the Common Area,
water, electrical and other utility services supplied directly to the Building
and Common Area, removal of trash, rubbish and other refuse from the Outside
Areas and Common Area, cleaning of and replacement of signs of the Outside Areas
and Common Area, including revamping and repairs made as reasonably required;
repair, operation and maintenance of the Common Area, including, but not limited
to, removal of any obstructions not reasonably required for the Common Area
uses, prohibition and removal of the sale or display of merchandise or the
storing of materials and/or equipment in the Common Area, and payment of all
electrical, water and other utility charges or fees for services furnished to
the Common Area and Outside Areas; obtaining and maintaining public liability,
property damage and other forms of insurance which Landlord may or is required
to maintain in connection with the Building and the Common Area (including the
payment of any deductibles thereunder); costs incurred in connection with
Tenant's compliance of any laws or changes in laws regarding Hazardous
Materials; equipment and supplies; employment of such personnel as Landlord may
deem reasonably necessary, if any, to direct parking and police the Common Area
and facilities; the cost of any capital improvements (other than tenant
improvements for specific tenants) specifically benefitting Tenant and made by
or on behalf of Landlord to the Outside Areas or Common Area to the extent of
the amortized amount thereof over the useful life of such capital improvements
calculated at a market cost of funds, all as reasonably determined by Landlord
using generally accepted accounting principles, for each such year of useful
life during the Term; depreciation amortized over the longest useful life
permitted under the Internal Revenue Code of machinery and equipment used in
connection with the maintenance and operation of the Outside Areas or the Common
Area for which a reasonable reserve has not been established as herein provided;
employment of personnel used in connection with any of the foregoing, including,
but not limited to, payment or provision for unemployment insurance, workers'
compensation insurance and other employee costs; the actual cost of any
Environmental consultant or other services used in connection with Landlord's
monitoring of the Project with respect to Hazardous Materials (such costs shall
not exceed $1,000.00 per calendar year); the cost of any tax, insurance or other
consultant utilized in connection with the Project; and any other items
reasonably necessary from time to time to properly repair, replace, maintain and
operate the Outside Areas or the Common Area. If Landlord elects to perform any
maintenance or repair herein described in conjunction with properties other than
the Project, and if a common maintenance contractor is contracted with for such
purpose, the contract amount allocable to the Project, as reasonably determined
by Landlord, shall be added to and deemed a part of Maintenance Expenses
hereunder. Increases in Maintenance Expenses by reason of a disproportionate
impact by Tenant thereon (for example, and not by way of limitation, increases
in costs of trash collection because of Tenant's excessive generation of trash
or increases in costs of Outside Areas or Common Area maintenance because of
Tenant's unpermitted storage of inventory or materials in the Outside Areas or
Common Area), in Landlord's reasonable judgment, may be billed by Landlord, as
an item of Additional Rent, directly to Tenant.
7.3 Payment of Real Property Taxes. Landlord shall pay, at Tenant's
expense and subject to reimbursement by Tenant as hereinafter set forth, all
Real Property Taxes (as hereinafter defined) levied against the Premises during
the Term and any Real Property Taxes which have accrued during the Term. The
amount of such payments by Landlord shall be based on tax bills and notices
received by Landlord pertaining to the Premises (and if Tenant receives any such
tax bills or notices, Tenant shall immediately forward same to Landlord) and
such payment shall be made before the last day such Real Property Taxes are
payable without penalty. Tenant shall reimburse to Landlord, as an item
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of Additional Rent, the full amount of such Real Property Taxes paid by Landlord
within thirty (30) days after Landlord's statement or invoice therefor, which
statement or invoice shall be accompanied by reasonable evidence of the amount
of such Real Property Taxes. Real Property Taxes shall not include any late
charges, penalties or interest attributable to Landlord's late payment (other
than caused solely by Tenant) or any charges, assessments or levies attributable
to another tenant or another tenant's improvements.
7.4 Definition of Real Property Taxes. The term "Real Property Taxes"
means any form of tax, assessment, charge, license, fee, rent tax, levy, penalty
(if a result of Tenant's delinquency), real property or other tax (other than
Landlord's net income, estate, succession, inheritance, or franchise taxes), now
or hereafter imposed with respect to the Project or any part thereof (including
any alterations), this Lease or any Rent payable under this Lease by any
authority having the direct or indirect power to tax, or by any city, county,
state or federal government or any improvement district or other district or
division thereof, whether such tax or any portion thereof (i)is determined by
the area of the Project or any part thereof or the Rent payable under this Lease
by Tenant including, but not limited to, any gross income or excise tax levied
by any of the foregoing authorities with respect to receipt of the Rent due
under this Lease, (ii)is levied or assessed in lieu of, in substitution for, or
in addition to, existing or additional taxes with respect to the Project or any
part thereof whether or not now customary or within the contemplation of
Landlord or Tenant, or (iii)is based upon any legal or equitable interest of
Landlord in the Project or any part thereof.
7.5 Apportionment of Taxes. If the Project is assessed as part of a
larger parcel, then Landlord shall equitably apportion the Real Property Taxes
assessed against the real property, which includes the Project and reasonably
determine the amount of Real Property Taxes attributable to the Project. If
other buildings exist on the assessed parcel, the Real Property Taxes
apportioned to the Project shall be based upon the ratio of the square footage
of all buildings within the Project to the square footage of all buildings on
the assessed parcel, and the amount of Real Property Taxes so apportioned to the
Project shall be included as part of Operating Expenses. Landlord's reasonable
determination of such apportionment shall be conclusive.
7.6 Tax on Improvements; Permitted Contests. Tenant shall, at
Landlord's election, be directly responsible for and shall pay the full amount
of any increase in Real Property Taxes attributable to any and all Tenant
Improvements and any other improvements of any kind whatsoever placed in, on or
about the Premises for the benefit of, at the request of, or by Tenant. Tenant
may contest the amount or validity of any Real Property Taxes by appropriate
proceedings, provided that Tenant gives Landlord prior Notice of any such
contest and keeps Landlord advised as to all proceedings, and provided further
that Tenant shall continue to reimburse Landlord for Landlord's payment of such
Real Property Taxes unless such proceedings shall operate to prevent or stay
such payment and the collection of the tax so contested. Landlord shall join in
any such proceedings if any Applicable Laws shall so require, provided that
Tenant shall hold harmless, indemnify, protect and defend Landlord from and
against any liability, claim, demand, cost or expense in connection therewith
including, but not limited to, actual attorneys' fees and costs reasonably
incurred.
7.7 Utilities and Services. Tenant shall be responsible for and shall
pay promptly, directly to the appropriate supplier, all charges for water, gas,
electricity, heat, light, power, telephone, refuse pickup, janitorial service,
interior landscape maintenance and all other utilities, materials and services
furnished directly to Tenant or the Premises or used by Tenant in, on or about
the Premises during the Term, together with any taxes thereon. If any utilities
or services are not separately metered or assessed to Tenant, Landlord shall
make a reasonable determination of Tenant's proportionate share of the cost of
such utilities and services and Tenant shall pay such amount to Landlord, as an
item of Additional Rent, within thirty (30) days after receipt of Landlord's
statement or invoice therefor. Alternatively, Landlord may elect to include such
cost in the definition of Project Costs, in which event Tenant shall pay
Tenant's share of such cost in the manner set forth in Section7.1. Landlord may
also require Tenant to have any Specialized HVAC system separately metered to
Tenant, at Tenant's expense. Landlord shall not be liable in damages or
otherwise for any failure or interruption of any utility or other service
furnished to the Premises, unless the direct result of or directly caused by
Landlord's gross negligence. No such failure or interruption shall be deemed an
eviction or entitle Tenant to terminate this Lease or withhold or abate any Rent
due hereunder.
ARTICLE VIII
ALTERATIONS
8.1 Permitted Alterations. After the Commencement Date, Tenant shall
not make or permit any Alterations in, or about the Premises without the prior
written consent of Landlord (which consent shall not be unreasonably withheld),
except for the Work defined in the Workletter attached hereto as Exhibit "C",
and Alterations not exceeding Five Thousand Dollars ($5,000.00) per occurrence.
Notwithstanding the foregoing, without the prior written consent of Landlord
(which consent shall not be unreasonably withheld, in no event shall any
Alterations (i)affect the exterior of the Building or the outside areas (or be
visible from adjoining sites), (ii)affect or penetrate any of the structural
portions of the Building including, but not limited to, the roof, (iii)require
any change to the basic floor plan of the Premises, any change to the structural
or mechanical components of the Premises, or any governmental approval or permit
as a prerequisite to the construction thereof, (iv) interfere in any manner with
the proper functioning of or Landlord's access to any mechanical, electrical,
plumbing or HVAC systems, facilities or equipment located in or serving the
Building, or (v)diminish the value of the Premises. All Alterations shall be
constructed pursuant to plans and specifications previously provided to and,
when
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applicable, approved in writing by Landlord, shall be installed by a
licensed contractor at Tenant's sole expense in compliance with all Applicable
Laws, and shall be accomplished in a good and workmanlike manner conforming in
quality and design with the Premises existing as of the Commencement Date. No
Hazardous Materials including, but not limited to, asbestos or
asbestos-containing materials, shall be used by Tenant or Tenant's Agents in the
construction of any Alterations permitted hereunder. All Alterations made by
Tenant shall be and become the property of Landlord upon the installation
thereof and shall not be deemed Tenant's Personal Property; provided, however,
that except for the Work defined in the Workletter attached hereto as Exhibit
"C", Landlord may, at its option, require that Tenant, upon the termination of
this Lease, at Tenant's expense, remove any or all nonstructural Alterations,
except Alterations required by law, installed by or on behalf of Tenant and
return the Premises to its condition as of the Commencement Date of this Lease,
normal wear and tear excepted. Notwithstanding any other provisions of this
Lease, Tenant shall be solely responsible for the maintenance, repair and
replacement of any and all Alterations made by or on behalf of Tenant (including
without limitation by Landlord on behalf of Tenant) to the Premises.
8.2 Trade Fixtures. Tenant shall, at its own expense, provide, install
and maintain in good condition all of Tenant's Personal Property required in the
conduct of its business in the Premises.
8.3 Mechanic's Liens. Tenant shall give Landlord Notice of Tenant's
intention to perform any work on the Premises which might result in any claim of
lien at least twenty (20) days prior to the commencement of such work to enable
Landlord to post and record a notice of nonresponsibility or other notice
Landlord deems proper prior to the commencement of any such work. Tenant shall
not permit any mechanic's, materialmen's or other liens to be filed against the
property of which the Premises are a part or against Tenant's leasehold interest
in the Premises. If Tenant fails to cause the release of record of any lien(s)
filed against the Premises or its leasehold estate therein by payment or posting
of a proper bond within ten (10) days from the date of the lien filing(s), then
Landlord may, at Tenant's expense, cause such lien(s) to be released by any
means Landlord deems proper including, but not limited to, payment of or defense
against the claim giving rise to the lien(s). All sums reasonably disbursed,
deposited or incurred by Landlord in connection with the release of the lien(s)
including, but not limited to, all costs, expenses and actual attorneys' fees,
shall be due and payable by Tenant to Landlord, as an item of Additional Rent,
on demand by Landlord, together with interest thereon at the Applicable Rate
from the date of such demand until paid by Tenant.
ARTICLE IX
MAINTENANCE AND REPAIR
9.1 Landlord's Maintenance of Outside Areas. Landlord shall, subject to
receiving Tenant's payment of Maintenance Expenses, and subject to Section 9.2,
Article XII and Article XIII, maintain in good condition and repair the Outside
Areas and every part thereof, including but not limited to, landscaping
(including replacement thereof), sprinkler systems, walkways, parking areas, and
approved signage. Such maintenance shall include pest control, restriping of the
parking areas and painting of the exterior walls of the Building, as and when
the same becomes necessary in Landlord's sole discretion which shall not be
unreasonable, maintenance and repair of the foundations, exterior walls and the
structural condition of interior bearing walls. The cost of any maintenance and
repairs on the part of Landlord provided for in this Section 9.1 shall be
amortized over the longest useful life permitted under the Internal Revenue Code
and shall be considered part of Maintenance Expenses and paid by Tenant in the
manner set forth in Section 7.1, except that repairs which Landlord deems arise
out of any act or omission of Tenant or Tenant's Agents shall be made at the
expense of Tenant. Landlord's obligation to repair and maintain hereunder shall
be limited to the cost of effecting such repair and maintenance and in no event
shall Landlord be liable for any costs or expenses in excess of said amounts,
including but not limited to any consequential damages, opportunity costs or
lost profits incurred or suffered by Tenant. Landlord shall be responsible at
Landlord's sole cost and expense to repair any damage to the Premises caused by
Landlord's or Landlord's Agents' negligence, willful acts or omissions or
default.
9.2. Tenant's Maintenance and Repair Obligations. Except as otherwise
provided, Tenant shall at all times during the Term of this Lease, at Tenant's
sole cost and expense, clean, keep, maintain, repair and make necessary
improvements to, the Building and every part thereof and all improvements
therein or thereto, in good and sanitary order and condition to the reasonable
satisfaction of Landlord and in compliance with all Applicable Laws. Tenant's
repair and maintenance obligations herein shall include, but are not limited to,
all necessary maintenance and repairs to all portions of the Building, and all
exterior entrances, all glass, windows, window casements, show window moldings,
partitions, doors, doorjambs, door closures, hardware, fixtures, electrical
lighting and outlets, plumbing fixtures, sewage facilities, interior walls,
floors, ceilings, skylights, fans and exhaust equipment, fire extinguisher
equipment and systems, the roof of the Building, all HVAC equipment, and all
repairs to Specialized HVAC (as hereinafter defined). As part of its maintenance
obligations hereunder, Tenant shall, at Landlord's request, provide Landlord
with copies of all maintenance schedules regarding the maintenance of the
Building, reports and notices prepared by, for, or on behalf of Tenant. Landlord
may impose reasonable restrictions and requirements with respect to repairs by
Tenant, which repairs shall be at least equal in quality to the original work,
and the provisions of Section 8.3 shall apply to all such repairs. Tenant's
obligation to repair includes the obligation to replace, as necessary,
regardless of whether
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the benefit of such replacement extends beyond the Term,
subject, however, to the following: So long as:
1. Tenant is not in default;
2. Tenant submits reasonably satisfactory evidence of
payment and maintenance, including without limitation
copies of all invoices, receipts, maintenance records and the
like; and
3. All systems, equipment and other items or things provided
herein or contemplated hereby are in good condition, working
order and otherwise in compliance with the terms of this
Lease;
as soon as reasonably possible after the expiration of the Lease Term, Landlord
shall (partially) reimburse Tenant for the reasonable cost of a replacement item
pro rata based upon Landlord's reasonable determination of that portion of the
useful life of such item which will extend beyond the Term, provided that, prior
to making any expenditure for such replacement item:
A. Tenant notifies Landlord in writing of Tenant's desire to
replace the item;
B. Tenant provides to Landlord adequate information concerning
the reasonable cost, anticipated useful life, type of item
to be used as a replacement (name, model number, etc.) and
such other information as Landlord shall reasonably request;
and
C. Landlord consents to reimburse a portion of the cost of
such replacement item as provided herein.
Such consent pursuant to provision C shall not to be unreasonably withheld or
delayed, but shall only be required to be given after Landlord receives from
Tenant the written notice and other information contemplated by provisions A and
B above, which must actually be received by Landlord at least five (5) business
days prior to Tenant's proposed purchase of the replacement item.
Notwithstanding the fact that Landlord shall make its determination as to
whether or not a replacement item is eligible for (partial) reimbursement
pursuant to the foregoing provisions within five(5) business days after actual
receipt of the written notice and other information contemplated by provisions A
and B above, Landlord need not make a determination as to or pay the actual
amount of such (partial) reimbursement until the expiration of the Term,
Tenant's qualification for the (partial) reimbursement pursuant to provisions
1,2 and 3 above and after Landlord's inspection of the then current condition of
the relevant replacement item to be conducted immediately after the end of said
Term, Landlord's reasonable determination of the remaining useful life of the
replacement item. Any special or above-standard heating, ventilating and air
conditioning installed by, on behalf of, or at the request of Tenant
("Specialized HVAC"), shall be paid for and maintained by Tenant at Tenant's
sole cost and expense. Notwithstanding the foregoing, Landlord shall have the
right, upon Notice to Tenant, to undertake the responsibility for maintenance
and repair of automatic fire extinguisher equipment, such as sprinkler systems
and alarms, Specialized HVAC and other obligations of Tenant hereunder which
Landlord deems appropriate to undertake, in which event the cost thereof shall
be included as part of Maintenance Expenses and paid by Tenant in the manner set
forth in Section 7.1.
9.3 Waiver. Tenant hereby waives all rights provided for by the
provisions of Sections1941 and 1942 of the California Civil Code and any present
or future laws regarding Tenant's right to make repairs at the expense of
Landlord or to terminate this Lease because of the condition of the Premises.
9.4 Self-Help. If Tenant refuses or fails to repair and maintain the
Premises as required hereunder within ten (10) days from the date on which
Landlord makes a written demand on Tenant to effect such repair and maintenance,
Landlord may enter upon the Premises and make such repairs or perform such
maintenance without liability to Tenant for any loss or damage that may accrue
to Tenant or its merchandise, fixtures or other property or to Tenant's business
by reason thereof, unless due to the negligence or willful misconduct of
Landlord. All sums reasonably disbursed, deposited or incurred by Landlord in
connection with such repairs or maintenance, plus percent (5%) for overhead,
shall be due and payable by Tenant to Landlord, as an item of Additional Rent,
on demand by Landlord, together with interest at the Applicable Rate on such
aggregate amount from the date of such demand until paid by Tenant.
ARTICLE X
COMMON AREA AND PARKING
In the event that the Building becomes multi-tenanted, the following shall
apply.
10.1 Grant of Nonexclusive Common Area License and Right. Landlord
hereby grants to Tenant and its permitted subtenants, in common with Landlord
and all persons, firms and corporations conducting business in the Project and
their respective customers, guests, licenses, invitees, subtenants, employees
and agents, the nonexclusive license and right to use the Common Area within the
Project for vehicular parking, for pedestrian and vehicular ingress, egress and
travel, and for such other purposes and for doing such other things as may be
provided for, authorized and/or permitted by the Restrictions, such nonexclusive
license and right to be appurtenant to Tenant's leasehold estate created by this
Lease. The nonexclusive license and rights granted pursuant to the provisions of
this ArticleX shall be subject to the provisions of the Restrictions, which
pertaining any way to the Common Area covered by such Restrictions, and the
provisions of this Lease.
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10.2 Use of Common Area. Notwithstanding anything to the contrary
herein, Tenant and its successors, assigns, employees, agents and invitees shall
use the Common Area only for the purposes permitted hereby and by the
Restrictions and the Rules and Regulations. All uses permitted within the Common
Area shall be undertaken with reason and judgment so as not to interfere with
the primary use of the Common Area which is to provide parking and vehicular and
pedestrian access throughout the Common Area within the Project and to adjacent
public streets for the Landlord, Landlord's Agents, its tenants, subtenants and
all persons, firms and corporations conducting business within the Project and
their respective customers, guests and licensees. In no event shall Tenant
erect, install, or place, or cause to be erected, installed, or placed any
structure, building, trailer, fence, wall, signs or other obstructions on the
Common Area except as otherwise permitted herein and in the Restrictions, and
Tenant shall not store or sell any merchandise, equipment or materials on the
Common Area.
10.3 Control of Common Area. Subject to provisions of the Restrictions,
all Common Area and all improvements located from time to time within the Common
Area shall at all times be subject to the exclusive control and management of
the Landlord. Landlord shall have the right to construct, maintain and operate
lighting facilities within the Common Area; to police the Common Area from time
to time; to change the area, level, location and arrangement of the parking
areas and other improvements within the Common Area; to restrict parking by
tenants, their officers, agents and employees to employee parking areas; to
enforce parking charges (by operation of meters or otherwise); to close all or
any portion of the Common Area or improvements therein to such extent as may, in
the opinion of counsel for Landlord, be legally sufficient to prevent a
dedication thereof or the accrual of any rights to any person or to the public
therein; to close temporarily all or any portion of the Common Area and/or the
improvements thereon; to discourage noncustomer parking; and to do and perform
such other acts in and to said Common Area and improvements thereon as, in the
use of good business judgment, Landlord shall determine to be advisable.
10.4 Maintenance of Common Area. Landlord shall operate and maintain
(or cause to be operated and maintained) the Common Area in a first-class
condition, in such manner as Landlord in its sole discretion shall determine
from time to time. Without limiting the scope of such discretion, Landlord shall
have the full right and authority to employee or cause to be employed all
personnel and to make or cause to be made all rules and regulations pertaining
to or necessary for the proper operation and maintenance of the Common Area and
the improvements located thereon. The cost of such maintenance of the Common
Area shall be included as part of Project Costs. No part of the Common Area may
be used for the storage of any items, including without limitation, vehicles,
materials, inventory and equipment. All trash and other refuse shall be placed
in designated receptacles. No work of any kind including, but not limited to,
painting, drying, cleaning, repairing, manufacturing, assembling, cutting,
merchandising or displaying shall be permitted upon the Common Area.
10.5 Revocation of License. All Common Area and improvements located
thereon which Tenant is permitted to use and occupy pursuant to the provisions
of this Lease are to be used and occupied under a revocable license and right,
and if any such license be revoked, or if the amount of such areas be
diminished, Landlord shall not be subject to any liability nor shall Tenant be
entitled to compensation or diminution or abatement of Rent, and such revocation
or diminution of such areas shall not be deemed constructive or actual eviction.
It is understood and agreed that the condemnation or other taking or
appropriation by any public or quasi-public authority, or sale in lieu of
condemnation, of all or any portion of the Common Area shall not constitute a
violation of Landlord's agreements hereunder, and Tenant shall not be entitled
to participate in or make any claim for any award or other condemnation proceeds
arising from any such taking or appropriation of the Common Area.
Notwithstanding the foregoing, so long as no Event of Default has occurred and
is continuing, Landlord shall provide to Tenant the number of vehicle parking
spaces set forth in Item15 of the Basic Lease Provisions throughout the Term
(subject to the rights of Landlord under this ArticleX).
10.6 Landlord's Reserved Rights. Landlord reserves the right to
install, use, maintain, repair, relocate and replace pipes, ducts, conduits,
wires and appurtenant meters and equipment included in the Premises or outside
the Premises, change the boundary lines of the Project and install, use,
maintain, repair, alter or relocate, expand and replace any Common Area;
provided, however, Landlord shall not unreasonably interfere with Tenant's use
of the Premises. Such rights of Landlord shall include, but are not limited to,
designating from time to time certain portions of the Common Area as exclusively
for the benefit of certain tenants in the Project.
10.7 Parking. Tenant shall be entitled to the number of vehicle parking
spaces set forth in Item15 of the Basic Lease Provisions, which spaces shall be
unreserved and unassigned, on those portions of the Common Area designated by
Landlord for parking. Tenant shall not use more parking spaces than such number.
All parking spaces shall be used only for parking by vehicles no larger than
full-size passenger automobiles pick-up trucks or delivery trucks. Tenant shall
not permit or allow any vehicles that belong to or are controlled by Tenant or
Tenant's employees, suppliers, shippers, customers, or invitees to be loaded,
unloaded, or parked in areas other than those designated by Landlord for such
activities. If Tenant permits or allows any of the prohibited activities
described above, then Landlord shall have the right, without notice, in addition
to such other rights and remedies that Landlord may have, to remove or tow away
the vehicle involved and charge the cost to Tenant, which cost shall be
immediately payable upon demand by Landlord. Parking within the Common Area
shall be limited to striped parking stalls, and no parking shall be permitted in
any driveways, accessways or in any area which would prohibit or impede the free
flow of traffic within the Common Area. If Tenant parks vehicles overnight at
the Project, Tenant shall indemnify, defend and hold Landlord free and harmless
of, from and against any and all claims, demands, suits, damages, losses,
liabilities, costs, and/or expenses (including reasonable attorneys' fees)
arising out of, resulting from or incurred in connection with the overnight
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parking of vehicles at the project. Vehicles which have been abandoned or
parking in violation of the terms hereof may be towed away at the owner's
expense.
ARTICLE XI
INDEMNITY AND INSURANCE
11.1 Indemnification. To the fullest extent permitted by law, Tenant
hereby agrees to defend (with attorneys reasonably acceptable to Landlord),
indemnify, protect and hold harmless Landlord and Landlord's Agents and any
successors to all or any portion of Landlord's interest in the Premises and
their directors, officers, partners, employees, authorized agents,
representatives, affiliates and Mortgagees, from and against any and all damage,
loss, claim, liability and expense including, but not limited to, actual
attorneys' fees and legal costs, incurred directly or indirectly by reason of
any claim, suit or judgment brought by or on behalf of (i)any person or persons
for damage, loss or expense due to, but not limited to, bodily injury or
property damage sustained by such person or persons which arise out of, are
occasioned by, or are in any way attributable to the use or occupancy of the
Premises or the acts or omissions of the Tenant or Tenant's Agents in or about
the Premises or the Project (including, but not limited to, any Event of Default
hereunder), or (ii)Tenant or Tenant's Agents for damage, loss or expense due to,
but not limited to, bodily injury or property damage which arise out of, are
occasioned by, or are in any way attributable to the use of any of the Common
Area, except to the extent caused by the sole active negligence or willful
misconduct of Landlord.
11.2. Property Insurance. Landlord shall obtain and keep in force
during the Term, (i) an "all risk" or "special causes of action" property
policy, including earthquake and flood, in the amount of the full replacement
cost covering the Premises, the Building and objects owned by Landlord and
normally covered under a "Boiler and Machinery" policy and any Alterations made
by or at the request of Tenant, and (ii) an "all risk" or "special causes of
action" policy of business interruption and/or loss of income insurance covering
a period of one (1) year, with loss payable to Landlord to the extent of Monthly
Rent and Additional Rent only. Tenant shall within ten (10) days of receipt of
Landlord's invoice or statement for such insurance pay or reimburse Landlord the
cost of same such insurance in an amount not to exceed Six Thousand Dollars
($6,000.00) per year. Tenant shall maintain and keep in force at its sole cost
and expense insurance covering its Personal Property.
11.3 Liability/Miscellaneous Insurance. Tenant shall maintain in full
force and effect at all times during the Term (plus such earlier and later
periods as Tenant may be in occupancy of the Premises), at its sole cost and
expense, for the protection of Tenant, Landlord and Landlord's Agents and
Mortgagees, policies of insurance issued by a carrier or carriers in accordance
with Section 11.8 which afford the following coverages: (i)statutory workers'
compensation, (ii)employer's liability with minimum limits of Five Hundred
Thousand Dollars ($500,000), and (iii)comprehensive/commercial general liability
including, but not limited to, blanket contractual liability (including the
indemnity set forth in Section11.1), fire and water legal liability, broad form
property damage, personal injury, completed operations, products liability,
independent contractors, and, if alcoholic beverages are served, or sold in the
Premises, comprehensive Host Liquor Liability Insurance, and owned, non-owned
and hired vehicles, of not less than the limits set forth in Item17 of the Basic
Lease Provisions (or current limit carried, whichever is greater), naming
Landlord, the Mortgagees, and the Additional Insureds named in Item16 of the
Basic Lease Provisions as additional insureds, and including a cross-liability
or severability interests indorsement.
11.4 Hazardous Materials. In the event Landlord consents to Tenant's
use, generation or storage of Hazardous Materials on, under or about the
Premises pursuant to Section6.2, and if at any time Tenant's net worth is less
than Twenty-Five Million Dollars (25,000,000.00), Landlord shall have the right
to require Tenant, at Tenant's sole cost and expense, to purchase insurance
specified and approved by Landlord, with coverage of no less than Five Million
Dollars ($5,000,000), insuring (i)any Hazardous Materials shall be removed from
the Premises, (ii)the Premises shall be restored to a clean, neat, attractive,
healthy, safe and sanitary condition, and (iii)any liability of Tenant, Landlord
and Landlord's Agents arising from such Hazardous Materials.
11.5 Deductibles; Blanket Coverage. Any policy of Property Insurance
required pursuant to this Lease containing a deductible exceeding Five Thousand
Dollars ($5,000) per occurrence must be approved in writing by Landlord prior to
the issuance of such policy, which approval shall not be unreasonably withheld.
Tenant shall be solely responsible for the payment of any deductible. Any
Property Insurance required of Tenant pursuant to this Lease may be provided by
means of a so-called "blanket policy", so long as (i)the Premises are
specifically covered (by rider, endorsement or otherwise), (ii)the limits of the
policy are applicable on a "per location" basis to the Premises and provide for
restoration of the aggregate limits, and (iii)the policy otherwise complies with
the provisions of this Lease.
11.6 Increased Coverage. In the event that Tenant exercises its Option
to Extend as defined in the Rider No. 1 to Lease attached hereto,
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Tenant shall provide Landlord, at Tenant's expense, with such increased amount
of existing insurance, and such other insurance as Landlord or the Mortgagees
may reasonably require, in coverages and amounts comparable to similar users and
buildings in the general area.
11.7 Sufficiency of Coverage. Neither Landlord nor any of Landlord's
Agents makes any representation that the types of insurance and limits specified
to be carried by Tenant under this Lease are adequate to protect Tenant. If
Tenant believes that any such insurance coverage is insufficient, Tenant shall
provide, at its own expense, such additional insurance as Tenant deems adequate.
Nothing contained herein shall limit Tenant's liability under this Lease, and
Tenant's liability under any provision of this Lease, including without
limitation under any indemnity provisions, shall not be limited to the amount of
any insurance obtained.
11.8 Insurance Requirements. Tenant's insurance (i)shall be in
accordance with the above requirements and shall be carried with companies that
have a Best's policyholder's rating of not less than "A", (ii)shall provide that
such policies shall not be subject to cancellation except after at least thirty
(30) days prior written notice to Landlord, and (iii)shall be primary, and any
insurance carried by Landlord or Landlord's Agents shall be noncontributing.
Tenant's policy or policies, or duly executed certificates for them shall be
deposited with Landlord prior to the Commencement Date. Prior to renewal of such
policies a binder evidencing continued coverage shall be deposited with
Landlord, which binder shall be replaced by a certificate of insurance within
sixty (60) days. If Tenant fails to procure and maintain the insurance required
to be procured by Tenant under this Lease, Landlord may, but shall not be
required to, order such insurance at Tenant's expense. All sums reasonably
disbursed, deposited or incurred by Landlord in connection therewith including,
but not limited to, all costs, expenses and actual attorneys' fees, shall be due
and payable by Tenant to Landlord, as an item of Additional Rent, on demand by
Landlord, together with interest thereon at the Applicable Rate from the date of
such demand until paid by Tenant. Notwithstanding the foregoing, if Landlord
orders such insurance on Tenant's behalf, and Tenant did in fact maintain such
insurance without interruption as required in this Section 11.8, then Landlord
shall bear the cost of the insurance that Landlord ordered on Tenant's behalf.
11.9 Landlord's Disclaimer. Notwithstanding any other provisions of
this Lease, and to the fullest extent permitted by law, Landlord and Landlord's
Agents shall not be liable for any loss or damage to persons or property
resulting from theft, vandalism, fire, explosion, falling materials, glass, tile
or sheetrock, steam, gas, electricity, water or rain which may leak from any
part of the Premises, or from the pipes, appliances or plumbing works therein or
from the roof, street or subsurface or whatsoever, unless caused by or due to
the sole active negligence or willful misconduct of Landlord. Tenant shall give
prompt Notice to Landlord in case of a casualty, accident or repair needed to
the Premises.
11.10 Waiver of Subrogation. Landlord and Tenant each hereby waive all
rights of recovery against the other and against the officers, employees, agents
and representatives of the other, on account of loss by or damage to any person
or the waiving party's property or the property of others under its control, to
the extent that such loss or damage is
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insured against under any fire and extended coverage insurance policy which
either may have or is required to have in force at the time of the loss or
damage. Landlord and Tenant shall each obtain from their respective insurers
under all policies of fire, theft, public liability, worker's compensation, and
other insurance maintained during the Term of this Lease covering the Building,
or any portion of it, or operations in it, a waiver of all rights of subrogation
that the insurer of one party might have against the other party. Landlord and
Tenant shall each indemnify the other against any loss or expense, including
reasonable attorney's fees, resulting from the failure to obtain this waiver.
ARTICLE XII
DAMAGE OR DESTRUCTION
12.1 Landlord's Obligation to Rebuild. If the Premises are damaged or
destroyed by fire or other casualty (a "Casualty"), Tenant shall promptly give
notice thereof to Landlord, and Landlord shall thereafter repair the Premises as
set forth in Sections12.4 and 12.5 unless Landlord has the right to terminate
this Lease as provided in Section12.2 and Landlord elects to so terminate or
Tenant has the right to terminate this Lease as provided in Section12.3 and
Tenant elects to so terminate.
12.2 Landlord's Right to Terminate. Landlord shall have the right to
terminate this Lease following a Casualty if any of the following occurs:
(i)insurance proceeds (together with any additional amounts Tenant elects, at is
option, to contribute) are not available to Landlord to pay one hundred percent
(100%) of the cost to fully repair the Premises, excluding the deductible (for
which Tenant shall pay Tenant's share of such deductible; (ii)Landlord's
Architect determines that the Premises cannot, with reasonable diligence, be
fully repaired by Landlord (or cannot be safely repaired because of the presence
of hazardous factors including, but not limited to, Hazardous Materials,
earthquake faults, radiation, chemical waste and other similar dangers) within
one hundred eighty (180) days after the date of such Casualty; (iii)the Premises
are destroyed or damaged during the last twelve (12) months of the Term; or
(iv)an Event of Default has occurred and is continuing at the time of such
Casualty and continues unabated for thirty (30) days thereafter. If Landlord
elects to terminate this Lease following a Casualty pursuant to this
Section12.2, Landlord shall give Tenant Notice of its election to terminate
within thirty (30) days after Landlord has knowledge of such Casualty, and this
Lease shall terminate fifteen (15) days after the date of such Notice.
12.3 Tenant's Right to Terminate. Subject to the latter terms hereof,
Tenant shall have the right to terminate this Lease following the destruction of
the Premises (or damage to the Premises so extensive as to reasonably prevent
Tenant's substantial use and enjoyment of the Premises) if any of the following
occurs: (i)the Premises cannot, with reasonable diligence, be fully repaired by
Landlord within two hundred (200) days after the date of the damage or
destruction, as determined by Landlord's Architect; (ii)the Premises cannot
safely be repaired because of the presence of hazardous factors, including
Hazardous Materials, earthquake faults, radiation, chemical waste and other
similar dangers; or (iii)the damage or destruction occurs during the last twelve
(12) months of the Term and cannot, with reasonable diligence, be fully repaired
by Landlord within ninety (90) days after the date of the destruction or damage,
as determined by Landlord's Architect. Notwithstanding the foregoing, Tenant
shall not have the right to terminate under this Section12.3 if (a)an Event of
Default has occurred and is continuing at the time of such damage or destruction
or at the time of exercising the right to terminate, or (b)the damage or
destruction was caused, in whole or in part, by the act or omission of Tenant's
or Tenant's Agents. If Tenant elects to terminate this Lease pursuant to this
Section12.3, Tenant shall give Landlord Notice of its election to terminate
within thirty (30) days after the date of such damage or destruction, and this
Lease shall terminate fifteen (15) days after the date of such Notice.
12.4 Effect of Termination. If this Lease is terminated following a
Casualty pursuant to Section12.2 or Section12.3, Landlord shall, subject to the
rights of the Mortgagees, be entitled to receive and retain all the insurance
proceeds resulting from or attributable to such Casualty, except for those
proceeds payable under policies obtained by Tenant which specifically insure
Tenant's Personal Property. If neither party exercises any such right to
terminate this Lease, this Lease will continue in full force and effect, and
Landlord shall, promptly following the tenth (10th) day after the date of such
Casualty and receipt of the amounts set forth in clause (i) of Section 12.2,
commence the process of obtaining necessary permits and approvals for the repair
of the Premises, and shall commence such repair and prosecute the same
diligently to completion as soon thereafter as is practicable. Tenant shall
fully cooperate with Landlord in removing Tenant's Personal Property and any
debris from the Premises to facilitate the making of such repairs.
12.5 Limited Obligation to Repair. Landlord's obligation, should it
elect or be obligated to repair the Premises following a Casualty, shall be
limited to the basic Building and Tenant Improvements and Tenant shall, at its
expense, replace or fully repair all Tenant's Personal Property and any
Alterations installed by Tenant existing at the time of such Casualty. If the
Premises are to be repaired in accordance with the foregoing, Tenant shall make
available to Landlord any portion of insurance proceeds it receives which are
allocable to the Tenant Improvements.
12.6 Abatement of Monthly Rent. During any period when a mutually
agreed upon third party architect reasonably determines that there is
substantial interference with Tenant's use of the Premises by reason of a
Casualty, Monthly Rent shall be temporarily abated in proportion to the degree
of such substantial interference, but only to the extent of any business
interruption or loss of income insurance proceeds received by Landlord from
Tenant's insurance described in Section11.2. Such abatement shall commence upon
the date Tenant notifies Landlord of such Casualty and shall end upon the
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Substantial Completion of the repair of the Premises which Landlord undertakes
or is obligated to undertake hereunder. Tenant shall not be entitled to any
compensation or damages from Landlord for loss of the use of the Premises,
Tenant's Personal Property or other damage or any inconvenience occasioned by a
Casualty or by the repair or restoration of the Premises thereafter, including,
but not limited to, any consequential damages, opportunity costs or lost profits
incurred or suffered by Tenant. Tenant hereby waives the provisions of
Section1932(2) and Section1933(4) of the California Civil Code, and the
provisions of any similar or successor statues.
12.7 Landlord's Determination. The determination in good faith by a
mutually agreed upon third party architect of or relating to the estimated cost
of repair of any damage, replacement cost, the time period required for repair
or the interference with or suitability of the Premises for Tenant's use or
occupancy shall be conclusive for purposes of this ArticleXII and ArticleXIII.
ARTICLE XIII
CONDEMNATION
13.1 Total Taking--Termination. If title to the Premises or so much
thereof is taken for any public or quasi-public use under any statute or by
right of eminent domain so that reconstruction of the Premises will not result
in the Premises being reasonably suitable for Tenant's continued occupancy for
the uses and purposes permitted by this Lease, this Lease shall terminate as of
the date possession of the Premises or part thereof is so taken.
13.2 Partial Taking. If any part of the Premises is taken for any
public or quasi-public use under any statute or by right of eminent domain and
the remaining part is reasonably suitable for Tenant's continued occupancy for
the uses permitted by this Lease, this Lease shall, as to the part so taken,
terminate as of the date that possession of such part of the Premises is taken
and the Monthly Rent shall be reduced in the same proportion than the floor area
of the portion of the Premises so taken (less any addition thereto by reason of
any reconstruction) bears to the original floor area of the Premises, as
reasonably determined by Landlord or Landlord's Architect. Landlord shall, at
its own cost and expense, make all necessary repairs or alterations to the
Premises so as to make the portion of the Premises not taken a complete
architectural unit. Such work shall not, however, exceed the scope of the work
done by Landlord in originally constructing the Premises. If severance damages
from the condemning authority are not available to Landlord in sufficient
amounts to permit such restoration, Landlord may terminate this Lease upon
Notice to Tenant. Monthly Rent due and payable hereunder shall be temporarily
abated during such restoration period in proportion to the degree to which there
is substantial interference with Tenant's use of the Premises, as reasonably
determined by Landlord or Landlord's Architect. Each party hereby waives the
provisions of Section1265.130 of the California Code of Civil Procedure and any
present or future law allowing either party to petition the Superior Court to
terminate this Lease in the event of a partial taking of the Building or
Premises.
13.3 No Apportionment of Award. Any award for any partial or total
taking shall be apportioned between the respective interests of Landlord and
Tenant in accordance with California law.
13.4 Temporary Taking. No temporary taking of the Premises (which for
purposes hereof shall mean a taking of all or any part of the Premises for one
hundred eighty (180) days or less) shall terminate this Lease or give Tenant any
right to any abatement of Rent. Any award made to Tenant by reason for such
temporary taking shall belong entirely to Tenant and Landlord shall not be
entitled to share therein. Each party agrees to execute and deliver to the other
all instruments that may be required to effectuate the provisions of this
Section13.4.
13.5 Sale Under Threat of Condemnation. A sale made in good faith to
any authority having the power of eminent domain, either under threat of
condemnation or while condemnation proceedings are pending, shall be deemed a
taking under the power of eminent domain for all purposes of this ArticleXIII.
ARTICLE XIV
ASSIGNMENT AND SUBLETTING
14.1 Prohibition. Tenant shall not directly or indirectly, voluntarily
or by operation of law, assign (which term shall include any transfer,
assignment, pledge, mortgage or hypothecation) this Lease, or any right or
interest hereunder, or sublet the Premises or any part thereof, or allow any
other person or entity to occupy or use all or any part of the Premises without
first obtaining the written consent of Landlord in each instance, which consent
shall not be unreasonably withheld. No assignment, encumbrance, subletting, or
other transfer in violation of the terms of this Article XIV, whether voluntary
or involuntary, by operation of law, under legal process or proceedings, by
receivership, in bankruptcy, or otherwise shall be valid or effective and, at
the option of Landlord, shall constitute an Event of Default under this Lease.
To the extent not prohibited by provisions of the Bankruptcy Code of 1978, 11
U.S.C.
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Section 101 et seq. (the "Bankruptcy Code"), Tenant on behalf of itself,
creditors, administrators and assigns waives the applicability of Sections
541(c) and 365(e) of the Bankruptcy Code unless the proposed assignee of the
trustee for the estate of the bankrupt meets Landlord's standards for consent as
set forth role. Landlord has entered into this Lease with Tenant in order to
obtain for the benefit of the project the unique attraction of Tenant's name and
business; the foregoing prohibition on assignment or subletting is expressly
agreed to by Tenant in consideration of such fact. If this Lease is assigned to
any person or entity pursuant to the provisions of the Bankruptcy Code, any and
all monies or other considerations payable or otherwise to be delivered in
connection with such assignment shall be paid or delivered to Landlord, shall be
and remain the exclusive property of Landlord and shall not constitute property
of Tenant or the estate of Tenant within the meaning of the Bankruptcy Code. Any
and all monies or other considerations constituting Landlord's property under
the proceeding sentence not paid or delivered to Landlord shall be held in trust
for the benefit of Landlord and be promptly paid or delivered to Landlord. Any
person or entity to which this Lease is assigned pursuant to the provisions of
the Bankruptcy Code shall be deemed without further act or deed to have assumed
all of the obligations arising under this Lease on and after the date of such
assignment. Any such assignee shall upon demand execute and earlier to Landlord
an instrument confirming such assumption.
14.2 Landlord's Consent. In the event Landlord consents to any
assignment or subletting, such consent shall not constitute a waiver of any of
the restrictions of this ArticleXIV and the same shall apply to each successive
assignment or subletting hereunder, if any. In no event shall Landlord's consent
to an assignment or subletting affect the continuing primary liability of Tenant
(which, following assignment, shall be joint and several with the assignee), or
relieve Tenant of any of its obligations hereunder without an express written
release being given by Landlord. In the event that Landlord shall consent to an
assignment or subletting under this ArticleXIV, such assignment or subletting
shall not be effective until the assignee or sublessee shall assume all of the
obligations of this Lease on the part of Tenant to be performed or observed and
whereby the assignee or sublessee shall agree that the provisions contained in
this Lease shall, notwithstanding such assignment or subletting, continue to be
binding upon it with respect to all future assignments and sublettings. Such
assignment or sublease agreement shall be duly executed and fully executed copy
thereof shall be delivered to Landlord, and Landlord may collect Monthly Rent
and Additional Rent due hereunder directly from the assignee or sublessee.
Collection of Monthly Rent and Additional Rent directly from an assignee or
sublessee shall not constitute a recognition of such assignee or sublessee as
the Tenant hereunder or a release of Tenant from the performance of all of its
obligations hereunder.
14.3 Information. Regardless of whether Landlord's consent is required
under this ArticleXIV, Tenant shall notify Landlord in writing of Tenant's
intent to assign this Lease or any right or interest hereunder, or to sublease
the Premises or any part thereof, and of the name of the proposed assignee or
sublessee, the nature of the proposed assignee's or sublessee's business to be
conducted on the Premises, the terms and provisions of the proposed assignment
or sublease, a copy of the proposed assignment or sublease form, and such other
information as Landlord may reasonably request concerning the proposed assignee
or sublessee including, but not limited to, net worth, income statements and
other financial statements for a two-year period preceding Tenant's request for
consent, evidence of insurance complying with the requirements of ArticleXI, a
completed Environmental Questionnaire from the proposed assignee or sublessee,
and the fee described in Section14.7.
14.4 Standard for Consent. Landlord shall, within thirty (30) days of
receipt of such Notice and all information requested by Landlord concerning the
proposed assignee or sublessee, elect to take one of the following actions:
(a) consent to such proposed assignment or sublease;
(b) refuse to consent to such proposed assignment or
sublease, which refusal shall be on reasonable grounds; or
(c) if Tenant proposes to sublease all or part of the Premises
for the entire remaining Term, Landlord may, at its option exercised by thirty
(30) days Notice to Tenant, elect to recapture such portion of the Premises as
Tenant proposes to sublease and as of the thirtieth (30th) day after Landlord so
notifies Tenant of its election to recapture, this Lease shall terminate as to
the portion of the premises recaptured and the Monthly Rent payable under this
Lease shall be reduced in the same proportion that the floor area of that
portion of the Premises so recaptured bears to the floor area of the Premises
prior to such recapture.
Tenant agrees, by way of example and without limitation, that it shall
not be unreasonable for Landlord to withhold its consent to a proposed
assignment or subletting if any of the following situations exist or may exist:
(i) Landlord determines that the proposed assignee's or
sublessee's use of the Premises conflicts with ArticleV or ArticleVI, presents
an unacceptable risk, as determined by Landlord, under ArticleVI (and Landlord
may require such assignee or sublessee to complete the Environmental
Questionnaire in the manner described in Section6.5 prior to making such
determination), or conflicts with any other provision under this Lease;
(ii) Landlord determines that the proposed assignee or
sublessee is not as financially responsible as Tenant as of the date of Tenant's
request for consent or as of the effective date of such assignment or
subletting;
(iii) Landlord determines that the proposed assignee or
sublessee lacks sufficient business reputation or experience to conduct on the
Premises a business of a type and quality equal to that conducted by Tenant;
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(iv) Landlord determines that the proposed assignment or
subletting would breach a covenant, condition or restriction in some other
lease, financing agreement or other agreement relating to the Project, the
Building, the Premises or this Lease;
(v) Landlord determines that the proposed assignee or
sublessee (a) has been required by any prior landlord, lender or governmental
authority to take remedial action in connection with Hazardous Materials
contaminating a property if such contamination resulted from the proposed
assignee's or sublessee's actions or use of the property in questions, or (b) is
subject to any enforcement order issued by an governmental authority in
connection with the use, disposal or storage of a Hazardous Material; or
(vi) An Event of Default has occurred and is continuing
at the time of Tenant's request for Landlord's consent, or as of the effective
date of such assignment or subletting.
Tenant acknowledges that if Tenant has any exterior sign
rights under this Lease, such rights are personal to Tenant and may not be
assigned or transferred to any assignee of this Lease or sublessee of the
Premises without Landlord's prior written consent, which consent may be withheld
in Landlord's sole and absolute discretion.
14.5 Bonus Value. Tenant agrees that fifty percent (50%) of any amounts
paid by the assignee or sublessee, however described, in excess of (i)the
monthly Rent payable by Tenant hereunder (or, in the case of sublease of a
portion of the Premises, in excess of the Monthly Rent reasonably allocable to
such portion), plus (ii)Tenant's direct out-of-pocket costs which Tenant
certifies to Landlord have been paid to provide occupancy-related services to
such assignee or sublessee of a nature commonly provided by landlords of similar
space, shall be the property of Landlord and such amounts shall be payable
directly to Landlord by the assignee or sublessee. At Landlord's request, a
written agreement shall be entered into by and among Tenant, Landlord and the
proposed assignee or sublessee confirming the requirements of this Section14.5.
14.6 Certain Transfers. The sale of all or substantially all of
Tenant's assets (other than bulk sales in the ordinary course of business), or,
if Tenant is a corporation, an unincorporated association, or a partnership, the
transfer, assignment or hypothecation of any stock or interest in such
corporation, association or partnership in the aggregate in excess of fifty
percent (50%) (except for publicly traded shares of stock constituting a
transfer of fifty percent (50%) or more in the aggregate, so long as no change
in the controlling interests of Tenant occurs as a result thereof) shall be
deemed an assignment within the meaning and provisions of this ArticleXIV.
14.7 Landlord's Fee and Expenses. If Tenant requests Landlord's consent
to an assignment or subletting by Tenant under this Lease, Tenant shall pay to
Landlord a fee of Three Hundred Dollars ($300) and all of Landlord's
out-of-pocket expenses including, but not limited to, attorneys' fees reasonably
incurred related to such assignment or subletting by Tenant, whether or not the
assignment or subletting is approved.
14.8 Transfer of the Premises by Landlord. Upon any conveyance of the
Premises and assignment by Landlord of this Lease, Landlord shall and is hereby
entirely released from all liability under any and all of its covenants and
obligations contained in or derived from this Lease occurring after the date of
such conveyance and assignment, and Tenant agrees to attorn to any entity
purchasing or otherwise acquiring the Premises.
ARTICLE XV
DEFAULTS AND REMEDIES
15.1 Tenant's Default. At the option of Landlord, a default under this
Lease by Tenant shall exist if any of the following events shall occur (each is
called an "Event of Default"):
(a) Tenant fails to pay the Rent payable hereunder, as and
when due, for a period of three (3) days after Notice by Landlord; provided,
however, the Notice given hereunder shall be in lieu of, and not in addition to,
any notice required under Section1161, et seq., of the California Code of Civil
Procedure;
(b) Tenant attempts to make or suffers to be made any
transfer, assignment or subletting, except as provided in ArticleXIV hereof;
(c) Any of Tenant's rights under this Lease are sold or
otherwise transferred by or under court order or legal process or otherwise or
if any of the actions described in Section15.2 are taken by or against Tenant or
any Guarantor;
(d) The Premises are used for any purpose other than as
permitted pursuant to Article V;
(e) Tenant vacates or abandons the Premises or fails to
continuously and uninterruptedly conduct its business in the Premises and
thereafter fails to pay rent:
(f) Any representation or warranty given by Tenant under or
in connection with this Lease
proves to be materially false or misleading;
(g) Tenant fails to timely comply with the provisions of
Article VI ("Hazardous Materials"), Article XIV ("Assignment and Subletting"),
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Article XVI ("Subordination; Estoppel Certificate; Financials"), Section 21.5
("Modifications for Mortgagees") or Section21.19 ("Authority"); or
(h) Tenant fails to observe, keep, perform or cure within
thirty (30) days after Notice by Landlord any of the other terms, covenants,
agreements or conditions contained in this Lease or those set forth in any other
agreements or rules or regulations which Tenant is obligated to observe or
perform. In the event such default reasonably could not be cured or corrected
within such thirty (30) day period, but is reasonably susceptible to cure or
correction, then Tenant shall not be in default hereunder if Tenant commences
the cure or correction of such default within such default within such
thirty(30) day period and diligently prosecutes the same to completion after
commencing such cure or correction. The Notice required by his
subparagraph15.1(h) shall be in lieu of, and not in addition to, any notice
required under Section1161, et seq., of the California Code of Civil Procedure.
Notices given under this Section15.1 shall specify the alleged default and shall
demand that Tenant perform the provisions of this Lease or pay the Rent that is
in arrears, as the case may be, within the applicable period of time, or quit
the Premises. No such Notice shall be deemed a forfeiture or a termination of
this Lease unless Landlord so elects in the Notice.
15.2 Bankruptcy or Insolvency. In no event shall this Lease be assigned
or assignable by operation of law and in no event shall this Lease be an asset
of Tenant in any receivership, bankruptcy, insolvency or reorganization
proceeding. In the event:
(a) A court makes or enters any decree or order adjudging
Tenant to be insolvent, or approving as properly filed by or against Tenant a
petition seeking reorganization or other arrangement of Tenant under any
provisions of the Bankruptcy Code or any applicable state law, or directing the
winding up or liquidation of Tenant and such decree or order shall have
continued for a period of thirty (30) days;
(b) Tenant makes or suffers any transfer which constitutes a
fraudulent or otherwise avoidable transfer under any provisions of the
Bankruptcy Code or any applicable state law;
(c) Tenant generally assigns its assets for the benefit of
its creditors; or
(d) The material part of the property of Tenant or any
property essential to Tenant's business or of Tenant's interest in this Lease is
sequestered, attached or executed upon, and Tenant fails to secure a return or
release of such property within thirty (30) days thereafter, or prior to sale
pursuant to such sequestration, attachment or levy, whichever is earlier.
Then this Lease shall, at Landlord's election, immediately
terminate and be of no further force or effect whatsoever, without the necessity
for any further action by Landlord, except that Tenant shall not be relieved of
obligations which have accrued prior to the date of such termination. Upon such
termination, the provisions herein relating to the expiration or earlier
termination of this Lease shall control and Tenant shall immediately surrender
the Premises in the condition required by the provisions of this Lease.
Additionally, Landlord shall be entitled to all relief, including recovery of
damages from Tenant, which may from time to time be permitted, or recoverable,
under the Bankruptcy Code or any other applicable state laws.
15.3 Landlord's Remedies. Upon the occurrence of an Event of Default,
then, in addition to and without waiving any other rights and remedies available
to Landlord at law or in equity or otherwise provided in this Lease, Landlord
may, at its option, cumulatively or in the alternative, exercise the following
remedies:
(a) Landlord may terminate Tenant's right to possession of the
Premises, in which case this Lease shall terminate and Tenant shall immediately
surrender possession of the Premises to Landlord. No act by Landlord other than
giving Notice to Tenant of Landlord's election to terminate Tenant's right to
possession shall terminate this Lease. Acts of maintenance, efforts to relet the
Premises, or the appointment of a receiver on Landlord's initiative to protect
Landlord's interest under this Lease shall not constitute a termination of
Tenant's right to possession. Termination shall terminate Tenant's right to
possession of the Premises, but shall not relieve Tenant of any obligation under
this Lease which has accrued prior to the date of such termination. Upon such
termination, Landlord shall have the right to re-enter the Premises, and remove
all persons and property, and Landlord shall also be entitled to recover from
Tenant:
(i) The worth of the time of award of the unpaid Monthly
Rent and Additional Rent which had been earned at the time of termination;
(ii) The worth at the time of award of the amount by
which the unpaid Monthly Rent and Additional Rent which would have been earned
after termination until the time of award exceeds the amount of such rental loss
that Tenant proves could have been reasonably avoided;
(iii) The worth at the time of award of the amount by
which the unpaid Monthly Rent and Additional Rent for the balance of the Term
after the time of award exceeds the amount of such rental loss that Tenant
proves could be reasonably avoided;
(iv) Any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result from Tenant's default including, but not limited to, the cost
of recovering possession of the Premises, commissions and other expenses of
reletting,
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the cost of rectifying any damage to the Premises occasioned by the act or
omission of Tenant, reasonable attorneys' fees, and any other reasonable costs;
and
(v) At Landlord's election, all other amounts in
addition to or in lieu of the foregoing as may be permitted by law.
As used in subsections (1) and (ii) above, the "worth at the
time of award" shall be computed by discounting the amount at the discount rate
of the Federal Reserve Bank of San Francisco at the time of award plus three
percent (3%).
(b) Landlord may elect not to terminate Tenant's right to
possession of the Premises, in which event this Lease will continue in full
force and effect as long as Landlord does not terminate Tenant's right to
possession, and Landlord may continue to enforce all of its rights and remedies
under this Lease, including the right to collect all Rent as it becomes due. In
the event that Landlord elects to avail itself of the remedy provided by this
subparagraph 15.3(b), Landlord shall not unreasonably withhold its consent to an
assignment or subletting of the Premises subject to the reasonable standards for
Landlord's consent as are contained in this Lease. In addition, in the event
Tenant has entered into a sublease which is valid under the terms of this Lease,
Landlord may also, at its option, cause Tenant to assign to Landlord the
interest of Tenant under said sublease including, but not limited to, Tenant's
right to payment of Rent as it becomes due. Landlord may elect to enter the
Premises and relet them, or any part of them, to third parties for Tenant's
account. Tenant shall be liable immediately to Landlord for all costs Landlord
incurs in reletting the Premises including, but not limited to, broker's
commissions, expenses of cleaning and remodeling the Premises required by the
reletting, attorneys' fees and like costs. Reletting can be for a period shorter
or longer than the remaining Term of this Lease and for the entire Premises or
any portion thereof. Tenant shall pay to Landlord the Monthly Rent and
Additional Rent due under this Lease on the dates the Monthly Rent and such
Additional Rent are due, less the Rent Landlord actually collects from any
reletting. Except as provided in the preceding sentence, if Landlord relets the
Premises or any portion thereof, such reletting shall not relieve Tenant of any
obligation hereunder. Notwithstanding the above, no act by Landlord allowed by
this subparagraph15.3(b) shall terminate this Lease unless Landlord notifies
Tenant in writing that Landlord elects to terminate this Lease.
15.4 No Surrender. Tenant waives any right of redemption or relief from
forfeiture under California Code of Civil Procedure, Sections1174 and 1179, or
under any other present or future law in the event Tenant is evicted or Landlord
or Landlord's Agents during the Term shall be deemed an acceptance of a
surrender of the Premises, and no agreement to accept a surrender shall be valid
unless in writing and signed by Landlord. No employee of Landlord or of
Landlord's Agent shall have any power to accept the keys to the Premises prior
to the termination of this Lease, and the delivery of the keys to any employee
shall not operate as a termination of this Lease or a surrender of the Premises.
15.5 Interest on Late Payments. Any Rent due under this Lease that is
not paid to Landlord within five (5) days of the date when due shall commence to
bear interest at the Applicable Rate until fully paid. Neither the accrual nor
the payment of interest shall cure any default by Tenant under this Lease.
15.6 Attorneys' and Other Fees. All sums reasonably incurred by
Landlord in connection with an Event of Default or holding over of possession by
Tenant after the expiration or termination of this Lease including, but not
limited to, all reasonably costs, expenses and reasonable accountants',
appraisers', attorneys' and other professional fees, and any collection agency
or other collection charges, shall be due and payable by Tenant to Landlord on
demand, and shall bear interest at the Applicable Rate from the date of such
demand until paid by Tenant. In addition, in the event that any action shall be
instituted by either of the parties hereto for the enforcement of any of its
rights in and under this Lease, the party in whose favor judgment shall be
rendered shall be entitled to recover from the other party all expenses
reasonably incurred by the prevailing party in such action, including actual
costs and reasonable attorneys' fees.
15.7 Landlord's Default. Landlord shall not be deemed to be in default
in the performance of any obligation required to be performed by it hereunder
unless and until it has failed to perform such obligation within thirty (30)
days after receipt of Notice by Tenant to Landlord (and the Mortgagees who have
provided Tenant with notice) specifying the nature of such default; provided,
however, that if the nature of Landlord's obligation is such that more than
thirty (30) days are required for its performance, then Landlord shall not be
deemed to be in default if it shall commence such performance within such thirty
(30) day period and thereafter diligently prosecutes the same to completion.
15.8 Limitation of Landlord's Liability. The obligations of Landlord do
not constitute the personal obligations of the individual limited partners if a
partnership or if a corporation the, trustees, directors, officers or
shareholders of Landlord or its constituent partners. If Landlord shall fail to
perform any covenant, term, or condition of this Lease upon Landlord's part to
be performed, Tenant shall be required to deliver to Landlord Notice of the
same. If, as a consequence of such default, Tenant shall recover a money
judgment against Landlord, such judgment shall be satisfied only out of the
proceeds of sale received upon execution of such judgment and levied thereon
against the right, title and interest of Landlord in the Building and out of
rent or other income from such property receivable by Landlord or out of
consideration received by Landlord from the sale or other disposition of all or
any part of Landlord's right, title or interest in the Building, and no action
for any deficiency may be sought or obtained by Tenant.
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15.9 Mortgagee Protection. Upon any default on the part of Landlord,
Tenant will give notice by registered or certified mail to any Mortgagee who has
provided Tenant with notice of its interest together with an address for
receiving notice, and shall offer such Mortgagee a reasonable opportunity to
cure the default (which in no event shall be less than sixty (60) days,
including time to obtain possession of the Premises by power of sale or a
judicial foreclosure, if such should prove necessary, to effect a cure. Tenant
agrees that each of the Mortgagees to whom this Lease has been assigned by
Landlord is an express third-party beneficiary hereof. Tenant shall not make any
prepayment of Monthly Rent more than one (1) month in advance without the prior
written consent of such Mortgagee. Tenant waives any right under California
Civil Code, Section 1950.7, or any other present or future law to the collection
of any deposit from such Mortgagee or any purchaser at a foreclosure sale of
such Mortgagee's interest unless such Mortgagee or such purchaser shall have
actually received and not refunded the deposit. Tenant agrees to make all
payments under this Lease to the Mortgagee with the most senior encumbrance upon
receiving a direction, in writing, to pay said amounts to such Mortgagee. Tenant
shall comply with such written direction to pay without determining whether an
event of default exists under such Mortgagee's loan to Landlord.
15.10 Landlord's Right to Perform. If Tenant shall at any time fail to
make any payment or perform any other act on its part to be made or performed
under this Lease, Landlord may subject to Tenant's right to cure following
notice under this Lease (but shall not be obligated to), at Tenant's expense,
and without waiving or releasing Tenant from any obligation of Tenant under this
Lease, make such payment or perform such other act to the extent Landlord may
deem desirable, and in connection therewith, pay expenses and employ counsel.
All sums paid by Landlord and all penalties, interest and costs including, but
not limited to, collection costs and attorneys' fees reasonably incurred in
connection therewith, shall be due and payable by Tenant to Landlord, as an item
of Additional Rent, on demand by Landlord, together with interest thereon at the
Applicable Rate from the date of such demand until paid by Tenant.
15.11 Limitation of Actions Against Landlord. Any claim, demand or
right of any kind by Tenant which is based upon or arises in connection with
this Lease shall be barred unless Tenant commences an action thereon within one
(1) year of the date of discovery by Tenant of the act, omission, event or
default upon which the claim, demand or right arises, has occurred.
15.12 Waiver of Jury Trial. To the full extent permitted by law, the
parties hereby waives the right to trial by jury in any action, proceeding or
counterclaim brought by either party on any matter whatsoever arising out of or
in any way connected with this Lease, the relationship of Landlord and Tenant,
Tenant's use or occupancy of the Premises and/or any claim of injury or damage.
ARTICLE XVI
SUBORDINATION; ESTOPPEL CERTIFICATE; FINANCIALS
16.1 Subordination, Attornment and Non-Disturbance. Without the
necessity of any additional document being executed by Tenant for the purpose of
effecting a subordination, and at the election of Landlord or any Mortgagee or
any ground lessor with respect to the land of which the Premises are a part,
this Lease shall be subject and subordinate at all times to (1)all ground leases
or underlying leases which may now exist or hereafter be executed in any amount
for which the Project, the Building, ground leases or underlying leases, or
Landlord's interest or estate in any of said items is specified as security.
Landlord or any such Mortgagee or ground lessor shall have the right, at its
election, to subordinate or cause to be subordinated any such ground leases or
underlying leases or any such liens to this Lease. No subordination shall permit
material interference with Tenant's rights hereunder, and any ground lessor or
Mortgagee shall recognize Tenant and its permitted successors and assigns as the
tenant of the Premises and shall not disturb Tenant's right to quiet possession
of the Premises during the Term so long as no Event of Default has occurred and
is continuing under this Lease. If Landlord's interest in the Premises is
acquired by any ground lessor or Mortgagee, or in the event proceedings are
brought for the foreclosure of, or in the event of exercise of the power of sale
under, any Mortgage made by Landlord covering the Premises or any part thereof,
or in the event a conveyance in lieu of foreclosure is made for any reason,
Tenant shall, notwithstanding any subordination and upon the request of such
successor in interest to Landlord, attorn to and become the Tenant of the
successor in interest to Landlord and recognize such successor in interest as
the Landlord under this Lease. Although this Section16.1 is self-executing,
Tenant covenants and agrees to execute and deliver, upon demand by Landlord and
in a commercially reasonable formor requested by Landlord, or any Mortgagee or
ground lessor, any additional documents evidencing the priority or subordination
of this Lease with respect to any such ground leases or underlying leases or the
lien of any such Mortgage, or evidencing the attornment of Tenant to any
successor in interest to Landlord as herein provided. Tenant's failure to timely
execute and deliver such additional documents shall, at Landlord's option,
constitute an event of Default hereunder.
16.2 Estoppel Certificate. Tenant shall, within twenty (20) days
following written request by Landlord, execute and deliver to Landlord any
documents, including estoppel certificates, in a form reasonably required by
Landlord (i)certifying that this Lease is unmodified and in full force and
effect or, if modified, attaching a copy of such modification and certifying
that this Lease, as so modified, is in full force and effect and the date to
which the Rent and other charges are paid in advance, if any, (ii)acknowledging
that there are not, to Tenant's knowledge, any uncured defaults on the part of
the Landlord or stating the nature of any uncured defaults, (iii)evidencing the
status of this Lease as may be required by a Mortgagee or a purchaser of the
Premises, (iv)certifying the current Monthly Rent among and the amount and form
of Security Deposit on deposit with Landlord, and (v)certifying to such other
information as Landlord, Landlord's Agents, Mortgagees and prospective
purchasers
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may reasonably request including, but not limited to, any requested information
within the requirements of this Lease including Article 6 regarding Hazardous
Materials. Tenant's failure to deliver an estoppel certificate within twenty
(20) days after delivery of Landlord's written request therefor shall constitute
an Event of Default hereunder.
16.3 Financial Information. Tenant shall deliver to Landlord, prior to
the execution of this Lease, and within ten (10) days following written request
therefor by Landlord at any time during the Term, Tenant's current financial
statements, and Tenant's financial statements for the two (2) years prior to the
current fiscal financial statement's year, certified to be true, accurate and
complete by the chief financial officer of Tenant, including a balance sheet and
profit and loss statement for the most recent prior year (collectively, the
"Statements"), which Statement shall accurately and completely reflect the
financial condition of Tenant. Landlord agrees that it will keep the Statements
confidential, except that Landlord shall have the right to deliver the same to
any proposed purchaser of the Premises, the Project or any portion thereof, and
to the Mortgagees of Landlord or such purchaser. Tenant acknowledges that
Landlord is relying on the Statements in its determination to enter into this
Lease, and Tenant represents to Landlord, which representation shall be deemed
made on the date of this Lease, that no material adverse change in the financial
condition of Tenant, as reflected in the Statements, has occurred since the date
Tenant delivered the Statements to Landlord. If any material change in Tenant's
financial condition, as reflected in the Statements, occurs prior to the date of
this Lease, or if Tenant fails to inform Landlord of any such material change,
Landlord shall have the right, in addition to any other rights and remedies of
Landlord, to terminate this Lease by notice to Tenant given within fifteen (15)
thirty (30) days after Landlord learns of such material change.
ARTICLE XVII
SIGNS AND GRAPHICS
Landlord shall designate the location on the Premises for one (1)
exterior identification sign for Tenant. Tenant shall have no right to maintain
identification signs in any other location in, or about the Premises (other than
a sign on the entrance door) and shall not display or erect any other signs,
displays or other advertising materials that are visible from the exterior of
the Building. The size, design, color and other physical aspects of the
permitted sign shall be subject to Landlord's written approval prior to
installation, which approval shall not be unreasonably withheld. The cost of all
signs and graphics, including the installation, maintenance and removal thereof,
shall be at Tenant's sole cost and expense. Landlord shall ensure that the
existing monument sign is blank and is in good condition and repair prior to
Tenant's occupancy of the Premises. If Tenant fails to maintain its signs, or if
Tenant fails to remove its name placard from the monument sign, upon termination
of this Lease and repair any damage caused by such removal (including, but not
limited to, repainting the affected area, if required by Landlord), Landlord may
do so at Tenant's expense. All sums reasonably disbursed, deposited or incurred
by Landlord in connection with such removal including, but not limited to, all
costs, expenses and actual attorneys' fees, shall be due and payable by Tenant
by Landlord on deemed by Landlord, together with interest thereon at the
Applicable Rate from the date of such demand until paid by Tenant.
ARTICLE XVIII
QUIET ENJOYMENT
Landlord for itself and its successors in interest, covenants that
Tenant, upon performing the terms, conditions and covenants of this Lease, shall
have quiet and peaceful possession of the Premises as against nay person
claiming the same by, through or under Landlord.
ARTICLE XIX
SURRENDER; HOLDING OVER
19.1 Surrender of the Premises. Upon the expiration or
earlier termination of this Lease, Tenant shall surrender the Premises to
Landlord in its condition existing as of the completion of the Work defined in
the Workletter attached hereto as Exhibit "C", normal wear and tear and acts of
God excepted, in a clean and broom swept condition with all interior walls in
good repair,, the HVAC equipment, plumbing, electrical and other mechanical
installations in good operating order, all to the reasonable satisfaction of
Landlord. Tenant shall remove from the Premises all of Tenant's Alterations
which Landlord requires Tenant to remove pursuant to Section 8.1 and all
Tenant's Personal Property, and shall repair any damage and perform any
restoration work caused by such removal. If Tenant fails to remove such
Alterations and Tenant's Personal Property which Tenant is authorized and
obligated to remove pursuant to the above, and such failure continues after the
termination of this Lease, Landlord any retain such property and all rights of
Tenant with respect to it shall cease, or Landlord may place all or any portion
of such property in public storage for Tenant's account. Tenant shall pay to
Landlord, upon demand, the costs of removal of any such Alterations and Tenant's
Personal Property and storage and transportation costs of same, and the cost of
repairing and restoring the Premises, together with attorneys' fees and interest
on said amounts at the Applicable Rate from the date of expenditure by Landlord.
If the Premises are not so surrendered at the termination of this Lease, Tenant
hereby agrees to indemnify Landlord and Landlord's Agents against all loss or
liability resulting from any delay by Tenant in so surrendering the Premises.
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19.2 Holding Over. If Tenant remains in possession of all or any part
of the Premises after the expiration of the Term with the prior written consent
of Landlord, such possession shall constitute a month-to-month tenancy only and
shall not constitute a renewal or extension for any further term. If Tenant
remains in possession of all or any part of the Premises after the expiration of
the Term without the prior written consent of Landlord, such possession shall
constitute a tenancy at sufferance. In either of such events, Monthly Rent shall
be increased to an amount equal to one hundred twenty-five percent (125%) of the
Monthly Rent payable during the last month of the Term, and any other sums due
hereunder shall be payable in the amounts and at the times specified in this
Lease. Any such tenancy shall be subject to every other term, condition, and
covenant contained in this Lease.
ARTICLE XX
CONSTRUCTION OF TENANT IMPROVEMENTS
The obligations of Landlord and Tenant, if any, with respect to the
Tenant Improvements, are set forth in the Work Letter attached as ExhibitC. It
is acknowledged and agreed that all Tenant Improvements under this Lease are and
shall be the property of Landlord from and after their installation, Tenant's
Personal Property excepted.
ARTICLE XXI
MISCELLANEOUS AND INTERPRETIVE PROVISIONS
21.1 Broker. Landlord and Tenant each warrant and represent to the
other that neither has had any dealings with any real estate broker, agent or
finder in connection with the negotiation of this Lease or the introduction of
the parties to this transaction, except for the Broker (whose commission shall
be paid by Landlord), and that it knows of no other real estate broker, agent or
finder who is or might be entitled to a commission or fee in connection with
this Lease. In the event of any additional claims for brokers' or finders' fees
with respect to this Lease, Tenant shall indemnify, hold harmless, protect and
defend Landlord from and against such claims if they shall be based upon any
statement or representation or agreement made by Tenant, and Landlord shall
indemnify, hold harmless, protect and defend Tenant from and against such claims
if they shall be based upon any statement, representation or agreement made by
Landlord.
21.2 Examination of Lease. Submission of this Lease for examination or
signature by Tenant does not create a reservation of or option to lease. This
Lease shall become effective and binding only upon full execution of this Lease
by both Landlord and Tenant.
21.3 No Recording. Tenant shall not record this Lease or any memorandum
of this Lease without Landlord's prior written consent, but if Landlord so
requests, Tenant agrees to execute, have acknowledged and deliver a memorandum
of this Lease in recordable form which Landlord thereafter may file for record.
21.4 Quitclaim. Upon any termination of this Lease Tenant shall, at
Landlord's request, execute, have acknowledged and deliver to Landlord an
instrument in writing releasing and quitclaiming to Landlord all right, title
and interest of Tenant in and to the Premises by reason of this Lease or
otherwise.
21.5 Modifications for Mortgagees. If in connection with obtaining
financing for the Premises or any portion thereof, Landlord's Mortgagees shall
request reasonable modifications to this Lease as a condition to such financing,
Tenant shall not unreasonably withhold, delay or defer its consent thereto,
provided such modifications do not adversely affect Tenant's rights,
unreasonably interfere with Tenant's use or enjoyment of the Premises, or
increase the monetary obligations of Tenant hereunder. Tenant's failure to so
consent shall constitute an Event of Default under this Lease.
21.6 Notice. Any Notice required or desired to be given under this
Lease shall be in writing and shall be addressed to the address of the party to
be served. The addresses of Landlord and Tenant are as set forth in Items1 and
3, respectively, of the Basic Lease Provisions, except that (a)prior to the
Commencement Date, the address for Notices to Tenant shall be as set forth
opposite Tenant's signature on this Lease, and (b)from and after the
Commencement Date, notwithstanding the addresses for Tenant set forth in Item3
of the Basic Lease Provisions, all Notices regarding the operation and
maintenance of the Project shall be delivered to Tenant at the Premises. Each
such Notice shall be deemed effective and given (i)upon receipt, if personally
delivered (which shall include delivery by courier or overnight delivery
service), (ii)upon being telephonically confirmed as transmitted, if sent by
telegram, telex or telecopy, (iii)two (2) business days after deposit in the
United States mail in orange County or in the count in which the Premises are
located, certified and postage prepaid, properly addressed to the party to be
served, or (iv)upon receipt if sent in any other way. Any party hereto may from
time to time, by Notice to the other in accordance with this Section21.6,
designate a different address than that set forth above for the purposes of
Notice.
21.7 Captions. The captions and headings used in this Lease are for the
purpose of convenience only and shall not be construed to limit or extend the
meaning of any part of this Lease.
21.8 Executed Copy. Any fully executed copy of this Lease shall be
deemed an original for all purposes.
21.9 Time. Time is of the essence for the performance of each term,
condition and covenant of this Lease.
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21.10 Severability. If any one or more of the provisions contained
herein shall for any reason be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality, or unenforceability shall not affect
any other provision of this Lease, but this Lease shall be construed as if such
invalid, illegal or unenforceable provision had not been contained herein.
21.11 Survival. All covenants and indemnities set forth herein which
contemplate the payment of sums, or the performance by Tenant after the Term or
following an Event of Default, including specifically, not limited to, the
covenants and indemnities set forth in Section5.3, ArticleVI, ArticleVII,
Section8.1, Section9.2, Section11.1, Section11.9, ArticleXV, and ArticleXIX, and
all representations and warranties of Tenant, shall survive the expiration or
sooner termination of this Lease.
21.12 Choice of Law. This Lease shall be construed and enforced in
accordance with the laws of the State of California. The language in all parts
of this Lease shall in all cases be construed as a whole according to its fair
meaning and not strictly for or against either Landlord or Tenant.
21.13 Gender; Singular, Plural. When the context of this Lease
requires, the neuter gender includes the masculine, the feminine, a partnership
or corporation or joint venture, the singular includes the plural and the plural
includes the singular.
21.14 Non-Agency. It is not the intention of Landlord or Tenant to
create hereby a relationship of master-servant or principal-agent, and under no
circumstance shall tenant herein be considered the agent of Landlord, it being
the sole purpose and intent of the parties hereto to create a relationship of
landlord and tenant.
21.15 Successors. The terms, covenants, conditions and agreements
contained in this Lease shall, subject to the provisions as to assignment,
subletting, and bankruptcy contained herein and any other provisions restricting
successors or assigns, apply to and bind the heirs, successors, legal
representatives and assigns of the parties hereto.
21.16 Waiver; Remedies Cumulative. The waiver by either party of any
term, covenant, agreement or condition herein contained shall not be deemed to
be a waiver of any subsequent breach of the same or any other term, covenant,
agreement or condition herein contained, nor shall any custom or practice which
may grow up between the parties in the administration of this Lease be construed
to waive or to lessen the right of Landlord to insist upon the performance by
Tenant in strict accordance with all of the provisions of this Lease. The
subsequent acceptance of Rent hereunder by Landlord shall not be deemed to be a
waiver of any proceeding breach by Tenant of any provisions, covenant, agreement
or condition of this Lease, other than the failure of Tenant to pay the
particular Rent payment so accepted, regardless of Landlord's knowledge of such
preceding breach at the time of acceptance of such Rent payment. Landlord's
acceptance of any check, letter of payment shall in no event be deemed an accord
and satisfaction, and Landlord shall accept the check, letter or payment without
prejudice to Landlord's right to recover the balance of the Rent or pursue any
other remedy available to it. The rights and remedies of either party under this
Lease shall be cumulative and in addition to any and all other rights and
remedies which either party has or may have.
21.17 Unavoidable Delay. Except for the monetary obligations of Tenant
under this Lease, neither party shall be chargeable with, liable for, or
responsible to the other for anything or in any amount for any Unavoidable Delay
and any Unavoidable Delay shall not be deemed a breach of or default in the
performance of this Lease, it being specifically agreed that any time limit
provision contained in this Lease (other than the scheduled expiration of the
Term) shall be extended for the same period of time lost by Unavoidable Delay.
21.18 Entire Agreement. This Lease is the entire agreement between the
parties, and supersedes any prior agreements, representations, negotiations or
correspondence between the parties, except as expressed herein. Except as
otherwise provided herein, no subsequent change or addition to this Lease shall
be binding unless in writing and signed by the parties hereto.
21.19 Authority. If Tenant is a corporation or a partnership, each
individual executing this Lease on behalf of the corporation or partnership, as
the case may be, represents and warrants that he is duly authorized to execute
and deliver this Lease on behalf of said entity in accordance with its corporate
bylaws, statement of partnership or certificate of limited partnership, as the
case may be, and that this Lease is binding upon said entity in accordance with
its terms. If Tenant is a corporation, Tenant shall, if requested by Landlord,
within thirty (30) days after execution of this Lease and prior to entering into
possession of the Premises, deliver to Landlord a certified copy of a resolution
of the Board of Directors of the corporation or certificate of the Secretary of
the corporation, authorizing, ratifying or confirming the execution of this
Lease. If Tenant is a partnership, Tenant shall, if requested by Landlord,
within thirty (30) days after the execution of this Lease and prior to entering
into possession of the Premises, deliver to Landlord a certified copy of this
partnership agreement authorizing such execution.
21.20 Guaranty. All exhibits, amendments, riders and addenda attached
to this Lease are hereby incorporated into and made a part of this Lease. In the
event of variation or discrepancy, the duplicate original hereof (including
exhibits, amendments, riders and addenda, if any, specified above) held by
Landlord shall control. All references in this Lease to Articles, Sections,
Exhibits, Riders and clauses are made, respectively, to Articles, Sections,
Exhibits, Riders and clauses of this Lease, unless otherwise specified.
21.22 Basic Lease Provisions. The Basic Lease Provisions at the
beginning of this Lease are intended to provide general information only. In the
event of any inconsistency between the Basic Lease Provisions and the specific
provisions of this Lease, the specific provisions of this Lease shall prevail.
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21.23 No Merger. The voluntary or other surrender of this Lease by
Tenant, or a mutual cancellation thereof, or a termination by Landlord, shall
not work a merger, and shall, at the option of Landlord, terminate all or any
existing subtenancies or may, at the option of Landlord, operate as an
assignment to Landlord of any or all such subtenancies.
21.24 Joint and Several Obligations. If more than one person or entity
is Tenant, the obligations imposed on each such person or entity shall be joint
and several.
21.25 No Light or Air Easement. Any diminution or shutting off of light
or air by any structure which may be erected on lands adjacent to the Building
shall in no way affect this Lease, abate Rent or otherwise impose any liability
on Landlord. This Lease does not confer any right with regard to the subsurface
below the ground level of the Building.
21.26 Security Measures. Tenant hereby acknowledges that Landlord shall
have no obligation whatsoever to provide guard service or other security
measures for the benefit of the Premises or the Project. Tenant assumes all
responsibility for the protection of Tenant, Tenant's Agents and the property of
Tenant and of Tenant's Agents from acts of third parties. Nothing herein
contained shall prevent Landlord, at Landlord's sole option, from providing
security protection for the Project or any part thereof, in which event the cost
thereof shall be included within the definition of Project Costs and paid by
Tenant in the manner set forth in Section7.1.
THIS LEASE is effective as of the date the last signatory necessary to
execute this Lease shall have executed this Lease.
"LANDLORD"
Birtcher Property Services as Manager for
Scripps Jack, Ltd., a California corporation
By: /s/ Michael S. Buzar
----------------------------------------
Name: Michael S. Buzar
Title: Senior Vice President
Date: November 13, 1996
By: /s/ Linda L. Bettini
---------------------------------------
Name: Linda L. Bettini, CPM
Title: Vice President
Date: November 13, 1996
"TENANT"
Agouron Pharmaceuticals, Inc., a California
corporation
By: /s/ Glenn Zinser
---------------------------------------
Name: Glenn Zinser
Title: Vice President, Operations
Date: November 8, 1996
By: /s/ Gary Friedman
---------------------------------------
Name: Gary E. Friedman, Esq.
Title: Vice President and General Counsel
Date: November 8, 1996
<PAGE>
EXHIBIT "A"
DESCRIPTION OF THE PREMISES
(DIAGRAM LAYOUT OMITTED)
<PAGE>
EXHIBIT "B"
PROPERTY DESCRIPTION
The "Property" is that real property development known as Scripps-Sorrento
Building, located at 4245 Sorrento Valley Blvd., San Diego, California.
The Property is further described as that certain improved real property, a
diagram of which is attached as part of this exhibit, and which is described
more particularly as: Parcel 1 of Parcel Map #12377 in the City of San Diego,
County of San Diego, State of California, filed in the office of The County
Recorder of San Diego County on October 18, 1982.
<PAGE>
EXHIBIT "C"
WORK LETTER
THIS WORK LETTER AGREEMENT ("Workletter") is executed simultaneously with that
certain Lease dated October 17, 1996 between Scripps Jack, Ltd., a California
limited partnership, as Landlord, and Agouron Pharmaceuticals, Inc., as Tenant
relating to demised premises ("Premises"), which Premises are more fully
identified in the Lease. Capitalized terms used herein, unless otherwise defined
in this Workletter, shall have the respective meanings assigned to them in the
Lease.
For and in consideration of the agreement to lease the Premises and the mutual
covenants contained herein and in the Lease, Landlord and Tenant hereby agree as
follows:
1. Delivery of Premises. Landlord delivered the Premises to Tenant pursuant to
the Lease and Tenant accepted the Premises in its "as is" condition, except for
latent structural defects and Landlord's Construction Obligations as defined
herein.
2. Work. Tenant, at its sole cost and expense, shall perform or cause to be
performed the work (the "Work") in the Premises provided for in the Plans (as
defined in Paragraph 3 hereof) submitted to and approved by Landlord, provided,
however, that Tenant's work shall not include Tenant's furniture, furnishings,
equipment or other interior decor. Tenant's Work shall be constructed in a good
and workmanlike fashion, in accordance with the requirements set forth herein
and in compliance with all applicable laws, ordinances, rules and other
governmental requirements. Tenant shall commence the construction of the Work
promptly following completion of the preconstruction activities provided for in
Paragraph 3 below and shall diligently proceed with all such construction.
Tenant shall coordinate its work so as to avoid interference with any work being
performed by or on behalf of Landlord and other tenants in the Project.
3. Preconstruction Activities.
(a) As soon as reasonably possible, but in no event later than November
30, 1996, Tenant shall submit the following information and items to Landlord:
(i) a detailed construction schedule containing the
major components of the Work and the time required for each, including the
scheduled commencement date of construction of the Work, milestone dates and the
estimated date of completion of construction;
(ii) an itemized statement of the estimated construction
cost, including permit, architectural and engineering fees;
(iii) the names and addresses of Tenant's contractor
(and the contractors' subcontractors) to be engaged by Tenant for the Work
(collectively "Tenant's Contractors"). Landlord has approved David Begent & Co.,
Inc. as the contractor engaged by Tenant for the Work.
(iv) certificates of insurance as hereinafter described.
Tenant shall not permit Tenant's Contractors to commence work until the required
insurance has been obtained and certified copies of policies or certificates
have been delivered to Landlord;
(v) the Plans for the Work, which Plans shall be subject
to Landlord's approval in accordance with Paragraph 3(b) below.
Tenant will update such information and items by notice to Landlord of any
changes.
(b) As used herein, the term "Plans" shall mean the full and detailed
final architectural and engineering plans and specifications covering the Work
(including, without limitation, architectural, mechanical and electrical working
drawings for the Work). The Plans shall be subject to the approval of all local
governmental authorities requiring approval, if any. Landlord has given its
approval of preliminary architectural drawings dated October 10, 1996 (SL-001;
K-01a, -01b, -01c, -0d; K-02, 02a, -02b, -02c, -02d; K-03a, -03b, -03c, 03d;
k-04a) and the basis of design dated October 29,1996 (collectively the "Design
Plan"). It is the intention of the parties that the Plans will reflect the
design set forth in the Design Plan, and that completed Plans which are
consistent with the Design Plan shall be deemed approved by the Landlord. If
changes are required to the Plans submitted by Tenant, (for example, if
<PAGE>
the Plans differ from the Design Plan) Tenant shall, within three (3) days
thereafter, submit to Landlord for its approval the proposed revised Plans as
amended in accordance with the changes so required. The Plans shall also be
revised, and the Work shall be changed, to incorporated any work required in the
Premises by and local governmental field inspector. Landlord's approval of the
Plans shall in no way be deemed to be acceptance or approval of any element
therein contained which is in violation of any applicable laws, ordinance,
regulations or other governmental requirements or a representation or warranty
that the Plans are adequate for any purpose. Landlord agrees that changes
mandated solely by governmental authorities shall be acceptable and shall not
require any further Landlord approval so long as such changes are implemented
without adversely altering the Building's structure and in a manner reasonably
acceptable to Landlord.
(c) No Work shall be undertaken or commenced by Tenant in the
Premises until:
(i) the Plans have been submitted to and approved by
Landlord, except that Tenant can begin demolition prior to final Plan approval;
(ii) all required insurance coverages have been obtained
by Tenant. (Failureof Landlord to receive evidence of such coverage upon
commencement of the Work shall not waive Tenant's obligations to obtain such
coverages.);
(iii) items required to be submitted to Landlord prior
to commencement of construction of the Work have been so submitted and have been
approved, where required;
(iv) Landlord has given written notice that the Work can
proceed.
4. Delay. In the event Tenant fails to deliver or deliver in sufficient and
accurate detail the information required under Paragraph 3 on or before the
respective dates specified in said Paragraph, or in the event Tenant, for any
reason, fails to complete the Work on or before the scheduled Commencement Date
of the term of the Lease, Tenant shall be responsible for rent and all other
obligations as set forth in the Lease from the Commencement Date under the
Lease, regardless of the degree of completion of the Work on such date, and no
such delay in completion of the Work shall relieve Tenant of any of its
obligations under said Lease.
6. Change Orders. All delays caused by Tenant-initiated change orders,
including, without limitation, any stoppage of work during the change order
review process, are solely the responsibility of Tenant and shall cause no delay
in the commencement of the Lease or the rental and other obligations therein set
forth.
7. Standards of Design and Construction and Conditions of Tenant's Performance.
All work done in or upon the Premises by Tenant shall be done according to the
standards set forth in this Paragraph 7, except as the same may be modified in
the Plans approved by or on behalf of Landlord and Tenant.
(a) Tenant's Plans and all design and construction of the Work shall
comply with all applicable statutes, ordinances, regulations, laws, codes and
industry standards. Approval by Landlord of the Plans shall not constitute a
waiver of this requirement or assumption by Landlord of responsibility for
compliance. Where several sets of the foregoing laws, codes and standards must
be met, the strictest shall apply where not prohibited by another law, code or
standard.
(b) Tenant shall obtain, at its own cost and expense, all required
building permits and, when construction has been completed, shall obtain, at its
own cost and expense, an occupancy permit for the Premises, a copy of which
permit shall be delivered to Landlord.
(c) Tenant's Contractors shall be licensed contractors, possessing good
labor relations, capable of performing quality workmanship and working in
harmony with Landlord's contractors and subcontractors and with other
contractors and subcontractors in the Building. All work shall be coordinated
with any other construction or other work in the Building or Project in order
not to affect adversely construction work being performed by or for Landlord, it
being understood that, in the event of any conflict, Landlord and its
contractors and subcontractors shall have priority over Tenant and Tenant's
Contractors.
(d) Landlord shall have the right, but not the obligation, to perform
on behalf of and for the account of Tenant, subject to reimbursement by Tenant,
any work (i) which Landlord deems to be necessary on an emergency basis, (ii)
which pertains to structural components, building systems or the general utility
systems for the Building, or(iii) which pertains to the erection of temporary
safety barricades or signs during construction.
(e) Tenant shall use only new, first-class materials in the Work,
except where explicitly shown otherwise in the Plans approved by Landlord and
Tenant. Tenant shall obtain warranties of at least one (1) year's duration from
the completion of the Work against defects in workmanship and materials on all
work performed and equipment installed in the Premises as part of the Work.
(f) Tenant and Tenant's Contractors shall comply with all reasonable
rules and regulations existing from time to time at the Project. Construction
equipment and materials are to be kept within the Premises, and delivery and
loading of equipment and materials shall be done at such locations and at such
time as Landlord shall direct.
(g) Landlord shall have the right to order Tenant or any of Tenant's
Contractors who violate the requirements imposed on Tenant or Tenant's
Contractors in performing work to cease work and remove its equipment and
employees from the Building or Project. No such action by Landlord shall delay
the commencement of the Lease or the rental and other obligations therein set
forth.
(h) Tenant shall arrange and pay for removal of construction debris and
shall not place debris in the Building's or Project's waste containers.
(i) Tenant shall permit access to the Premises, and the Work shall be
subject to inspection, by Landlord and Landlord's architects, engineers,
contractors and other
<PAGE>
representatives at all times during the period in which the Work is being
constructed and installed and following completion of the Work.
(j) Tenant shall proceed with its work expeditiously, continuously and
efficiently, and shall use its best efforts to complete the same as soon as
reasonably possible. Tenant shall notify Landlord upon completion of the Work
and shall furnish Landlord with such further documentation as may be necessary
under Paragraphs 9 below.
(k) Tenant shall furnish to Landlord "as-built" drawings of the Work
within thirty (30) days after completion of the Work.
(l) Tenant shall impose on and enforce all applicable terms of this
Workletter against Tenant's architect and Tenant's Contractors.
8. Insurance and Indemnification.
(a) In addition to any insurance which may be required under the Lease,
Tenant shall secure, pay for and maintain or cause Tenant's Contractors to
secure, pay for and maintain during the continuance of construction and
fixturing work within the Building or Premises, insurance in the following
minimum coverages and limits of liability:
(i) workers' compensation and employers' liability insurance
with limits of not less than $500,000.00, or such higher amounts as may be
required from time to time by any employee benefit acts or other statutes
applicable where the work is to be performed, and in any event sufficient to
protect Tenant's Contractors from liability under the aforementioned acts;
(ii) comprehensive or commercial general liability insurance
(including contractors' protective liability) in an amount not less than
$2,000,000.00 per occurrence, whether involving bodily injury liability (or
death resulting therefrom) or property damage liability or a combination thereof
with a minimum aggregate limit of not less than $10,000,000.00. Such insurance
shall provide for explosion and collapse, completed operations coverage and
broad form blanket contractual liability coverage and shall insure Tenant's
Contractors against any and all claims for bodily injury, including death
resulting therefrom, and damage to the property of others and arising from its
operations under the contracts whether such operations are performed by Tenant's
Contractors or by anyone directly or indirectly employed by any of them;
(iii) comprehensive automobile liability insurance, including
the ownership, maintenance and operation of any automotive equipment, owned,
hired or nonowned, in an amount not less than $500,000.00 for each person in one
accident and $1,000,000.00 for injuries sustained by two or more persons in any
one accident, and property damage liability in an amount not less than
$1,000,000.00 for each accident. Such insurance shall insure Tenant's
Contractors against any and all claims for bodily injury, including death
resulting therefrom, and damage to the property of others arising from its
operations under the contracts, whether such operations are performed by
Tenant's Contractors or by anyone directly or indirectly employed by any of
them;
(iv) "all risk" builder's risk insurance upon the entire Work
to the full insurable value thereof. This insurance shall include the interests
of Landlord and Tenant (and their respective contractors and subcontractors of
any tier to the extent of any insurable interest therein) in the Work and shall
insure against the perils of fire and extended coverage and shall include "all
risk" builder's risk insurance for physical loss or damage including, without
duplication of coverage, theft, vandalism and malicious mischief. If portions of
the Work are stored off the site of the Building or in transit to said site are
not covered under said "all risk" builder's risk insurance, then Tenant shall
effect and maintain similar property insurance on such portions of the Work. Any
loss insured under said "all risk" builder's risk insurance is to be adjusted
with Landlord and Tenant and made payable to Landlord as trustee for the
insureds, as their interests may appear.
All policies (except the workers' compensation policy) shall be endorsed to
include as additional insured parties Landlord, the Mortgagees, and the
Additional Insureds named in Item 16 of the Basic Lease Provisions The waiver of
subrogation provisions contained in the Lease shall apply to all insurance
policies (except the workers' compensation policy) to be obtained by Tenant
pursuant to this Paragraph. The insurance policy endorsements shall also provide
that all additional insured parties shall be given thirty (30) days' prior
written notice of any cancellation or nonrenewal of coverage (except that ten
(10) days' notice shall be sufficient in the case of cancellation for nonpayment
of premium) and shall provide that the insurance coverage afforded to the
additional insured parties thereunder shall be primary to any insurance carried
independently by said additional insured parties. Additionally, where
applicable, each policy shall contain a cross-liability and severability of
interest clause.
(b) Without limitation of the indemnification provisions contained in
the Lease, to the fullest extent permitted by law Tenant agrees to indemnify,
protect, defend and hold harmless Landlord, Landlord's contractors and
Landlord's architects and their partners, directors, officers, employees and
agents, from and against all claims, liabilities, losses, damages and expenses
of whatever nature arising out of or in connection with the Work or the entry of
Tenant or Tenant's Contractors into the Project, the Building and the Premises,
including, without limitation, mechanics' liens or the cost of any repairs to
the Premises, Building or Project necessitated by activities of Tenant or
Tenant's Contractors and bodily injury to persons or damage to the property of
Tenant, its employees, agents, invitees or licensees or others. It is understood
and agreed that the foregoing indemnity shall be in addition to the insurance
requirements set forth above and shall not be in discharge of or in substitution
for same or any other indemnity or insurance provision of the Lease.
<PAGE>
9. Landlord's Contribution; Excess Amounts.
(a) Upon completion of the work, Tenant shall furnish Landlord with
final waivers of liens and contractors' affidavits, in such form as may be
required by Landlord, from all parties performing labor or supplying materials
or services in connection with the Work showing that all of said parties have
been compensated in full and waiving all liens in connection with the Premises
and Building. Tenant shall submit to Landlord a detailed breakdown of Tenant's
total construction costs, together with such evidence of payment as is
reasonably satisfactory to Landlord.
(b) Upon completion of the Work and Tenant's satisfaction of all
requirements set forth herein, Landlord shall make a dollar contribution in the
amount of Three Hundred Ninety Five Thousand Dollars ($395,000.00)("Landlord's
Contribution") for application to the extent thereof to the cost of the Plans
and the Work. If such costs of the Plans and the Work and exceeds Landlord's
Contribution, Tenant solely shall have responsibility for the payment of such
excess cost. If the cost of the Plans, and the Work is less than Landlord's
Contribution, Landlord shall be entitled to retain such excess amount.
Notwithstanding anything herein to the contrary, Landlord may deduct from
Landlord's Contribution any amounts due to Landlord or its architects or
engineers under this Workletter.
10. Miscellaneous.
(a) Except as expressly set forth herein or in the Lease, Landlord has
no agreement with Tenant and has no obligation to do any work with respect to
the Premises.
(b) If the Plans for the Work require the construction and installation
of more fire hose cabinets or telephone/electrical closets than the number
provided in the core of the Building in which the Premises are located, then
Tenant agrees to pay all costs and expenses arising from the construction and
installation of such additional fire hose cabinets or telephone/electrical
closets.
(c) Time is of the essence under this Workletter.
(d) Any person signing this Workletter on behalf of Landlord and/or
Tenant warrants and represents he has authority to do so.
(e) If Tenant fails to make any payment relating to the Work as
required hereunder, Landlord, at its option, may complete the work pursuant to
the approved Plans and continue to hold Tenant liable for the costs thereof and
all other costs due to Landlord. Tenant's failure to pay any amounts owed by
Tenant hereunder when due or Tenant's failure to perform its obligations
hereunder shall also constitute a default under the Lease, and Landlord shall
have all the rights and remedies granted to Landlord under the Lease for
nonpayment of any amounts owed thereunder or failure by Tenant to perform its
obligations thereunder.
(f) Notices under this Workletter shall be given in the same manner as
under the Lease.
(g) The liability of Landlord hereunder or under any amendment hereto
or any instrument or document executed in connection herewith (including,
without limitation, the Lease) shall be limited to and enforceable solely
against Landlord's interest in the Building.
(h) The headings set forth herein are for convenience only.
(i) This Workletter sets forth the entire agreement of Tenant and
Landlord regarding the Work. This Workletter may only be amended if in writing
and duly executed by both Landlord and Tenant.
<PAGE>
IN WITNESS WHEREOF, this Workletter is executed as of the date and year first
written above.
"LANDLORD"
Birtcher Property Services as Manager for
Scripps Jack, Ltd., a California corporation
By: /s/ Michael S. Buzar
----------------------------------------
Name: Michael S. Buzar
Title: Senior Vice President
Date: November 13, 1996
By: /s/ Linda L. Bettini
---------------------------------------
Name: Linda L. Bettini, CPM
Title: Vice President
Date: November 13, 1996
"TENANT"
Agouron Pharmaceuticals, Inc., a California
corporation
By: /s/ Glenn Zinser
---------------------------------------
Name: Glenn Zinser
Title: Vice President, Operations
Date: November 8, 1996
By: /s/ Gary Friedman
---------------------------------------
Name: Gary E. Friedman, Esq.
Title: Vice President and General Counsel
Date: November 8, 1996
<PAGE>
EXHIBIT "D"
COMMENCEMENT DATE MEMORANDUM
TO: DATED:___________
"Tenant"
Re: Office Lease dated ________________________, 19___, by and between _______
_______________________________________, as Landlord, and _____________________,
as Tenant (the "Lease").
Please acknowledge that the Commencement Date of the Lease is _________,
19___ and that the Expiration Date of the Lease is _______________, 19__.
Very truly yours,
By: ________________________
Its: ________________________
"Landlord"
Tenant hereby confirms the information set forth above, and further
acknowledges that Landlord has fulfilled its obligations, if any, regarding the
construction of Tenant's initial leasehold improvements under the
above-referenced Lease.
By: ________________________
Its: ________________________
Dated:______________________, 19__
"Tenant"
<PAGE>
EXHIBIT "E"
ADJUSTMENT TO MONTHLY RENT
<TABLE>
<CAPTION>
Monthly Rent
per Square Foot
Of Gross
Period Building Area
------ -----------------
<S> <C>
May 15,1997 through and including December 31, 1997 $1.45
January 1, 1998 through and including December 31, 1998 $1.49
January 1, 1999 through and including December 31, 1999 $1.54
January 1, 2000 through and including December 31, 2000 $1.58
January 1, 2001 through and including December 31, 2001 $1.63
</TABLE>
<PAGE>
EXHIBIT F
RULES AND REGULATIONS
This Exhibit sets forth the rules and regulations governing
Tenant's use of the Premises leased to Tenant pursuant to the terms, covenants
and conditions of the Lease to which this Exhibit is attached and therein made
part thereof. Unless otherwise defined, capitalized terms used herein shall have
the same meaning as set forth in the Lease. In the event of any conflict or
inconsistency between this Exhibit and the Lease, the Lease shall control.
1. Tenant shall not place anything or allow anything to be
placed near the glass of any window, door, partition or wall which may appear
unsightly from outside the Premises.
2. The walls, walkways, sidewalks, entrance passages, courts
and vestibules shall not be obstructed or used for any purpose other than
ingress and egress of pedestrian travel to and from the Premises, and shall not
be used for loitering or gathering, or to display, store or place any
merchandise, equipment or devices, or for any other purpose. The walkways,
entrance passageways, courts, vestibules and roof are not for the use of the
general public and Landlord shall retain the right to control and prevent access
thereto by all persons whose presence in the judgment of Landlord shall be
prejudicial to the safety, character, reputation and interests of the Building
and its tenants, provided that nothing therein contained shall be construed to
prevent such access to persons with whom Tenant normally deals in the ordinary
course of Tenant's business unless such persons are engaged in illegal
activities.
3. No awning or other projection shall be attached to the
outside walls of the Building. No security bars or gates shall be installed
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld. Neither the interior nor exterior of any windows shall be
coated or otherwise sunscreened without the express written consent of Landlord,
which consent shall not be unreasonably withheld.
4. Tenant shall not in any way deface any part of the
Premises or the Building. The expense of repairing any damage resulting from a
violation of this rule shall be borne by the Tenant.
5. The toilet rooms, urinals, wash bowls and other plumbing
apparatus shall not be used for any purpose other than that for which they were
constructed and no foreign substance or any kind whatsoever shall be thrown
therein. The expense for any breakage, stoppage or damage resulting from the
violation of this rule shall be borne by the Tenant.
6. The Premises shall not be used for manufacturing, offices
or the storage of merchandise except as the same me be incidental to the
permitted use of the Premises. No exterior storage shall be allowed at any time
without prior written approval of Landlord. The Premises shall not be used for
cooking or washing clothes without the prior written consent of Landlord, or for
lodging or sleeping or for any illegal purposes.
7. Tenant shall not make, or permit to be made, any unseemly
or disturbing noises or disturb or interfere with the neighboring building or
premises or those having business with them, whether by the use of any musical
instrument, radio, phonograph, machinery, or otherwise.
8. Tenant shall not use the name of the Building or the
Project in connection with or in promoting or advertising the business of
Tenant, except as Tenant's address, without the prior written consent of
Landlord. Landlord shall have the right to prohibit any advertisement by Tenant
which, in Landlord's reasonable opinion, tends to impair the reputation of the
Project or its desirability for its intended use, and upon written notice from
Landlord Tenant shall refrain from or discontinue such advertising.
9. Canvassing, soliciting, peddling, parading, picketing,
demonstrating or otherwise engaging in any conduct that unreasonably impairs the
value or use of the Premises or the Project are prohibited and Tenant shall
cooperate to prevent the same.
10. All equipment of any electrical or mechanical nature shall
be placed by Tenant on the Premises, in settings approved by Landlord in
writing, in such a way as to best minimize, absorb and prevent any vibration,
noise or annoyance. No Equipment of any type shall be [placed on the Premises
which in Landlord's opinion exceeds the load limits of the floor or otherwise
threatens the soundness of the structure or improvements of the Building.
11. No aerial antenna shall be erected on the roof or exterior
of the Premises, or on the rounds, without in each instance the prior written
consent of Landlord. Any aerial antenna so installed by or on behalf of Tenant
without such written consent shall be subject to removal by Landlord at any time
without prior notice at the expense of Tenant, and Tenant shall upon Landlord's
demand pay a removal fee to Landlord of not less than $200.00.
12. The entire Premises, including vestibules, entrances,
doors, fixtures, windows and plate glass, shall at all times be maintained in a
safe, neat and clean condition by Tenant. All trash, refuse and wastes materials
shall be regularly removed from the Premises by Tenant and placed in the
containers at the locations designated by Landlord for refuse collection. All
cardboard boxes must be "broken down" prior to being placed in the trash
containers. All Styrofoam chips must be bagged or otherwise contained prior to
placement in the trash containers, so as not to constitute a nuisance. Pallets
may not be disposed of in the trash containers or enclosures. The burning of
trash, refuse or waste materials is prohibited.
13. Tenant shall use at Tenant's cost such pest extermination
contractor as Landlord may direct and at such intervals as Landlord and Tenant
determine necessary.
14. Tenant shall not change locks or install other locks on
doors of the Premises, without the prior written consent of Landlord. In the
event of loss of any keys furnished by Landlord for Tenant, Tenant shall pay to
Landlord the cost thereof.
<PAGE>
15. No person shall enter or remain within the Project while
intoxicated or under the influence of liquor or drugs. Landlord shall have the
right to exclude or expel from the Project any person who, in the absolute
discretion of Landlord, is under the influence of liquor or drugs.
Tenant agrees to comply with all such Rules and Regulations.
Should Tenant not abide by these Rules and Regulations, Landlord may serve a
three (3) day notice to correct the deficiencies. If Tenant has not corrected
the deficiencies by the end of the notice period, Tenant will be in default of
the Lease, and Landlord and/or its designee shall have the right, without
further notice, to cure the violation at Tenant's expense.
Neither Landlord nor Landlord's Agents or any other person or
entity shall be responsible to Tenant or to any other person for the ignorance
or violation of these Rules and Regulations by any other tenant or other person.
Tenant shall be deemed to have read these Rules and Regulations and to have
agreed to abide by them as a condition precedent, waivable only by Landlord, to
Tenant's occupancy of the Premises.
<PAGE>
RIDER NO.1 TO LEASE
DATED October 25, 1996
BY AND BETWEEN
Scripps Jack, Ltd., a California limited partnership,
AS LANDLORD Agouron Pharmaceuticals, Inc., a California
corporation, AS TENANT
This Rider, dated as of October 17, 1996, is attached to and made a part of the
above-described lease (the "Lease") between the above-named Landlord and Tenant.
Except as otherwise set forth in this Rider, all terms used in this Rider shall
have the same meaning as when used in the foregoing portion of the Lease. To the
extent of any inconsistencies between the foregoing provisions of the Lease and
the provisions of this Rider, the former are hereby amended.
OPTION TO EXTEND
(a) Option. Tenant shall have the right to extend the Term of the Lease
for a period of sixty (60) months (the "Extension Period"), provided that Tenant
(i) is not in actual default under any provision of the Lease, (ii) is occupying
substantially all of the Premises, and (iii) has not assigned or subleased any
portion of the Premises, unless otherwise approved by Landlord in other such
assignment or sublease agreements.
(b) Exercise of Option. Tenant shall exercise its right to extend the
Lease Term only by delivering written notice to Landlord or Tenant's desire to
so extend the Lease Term no greater than 270 days nor less than 180 days prior
to the commencement of each Extension Period (the "Extension Notice").
(c) New Lease Or Extension Amendment. Upon receipt of the Extension
Notice, Landlord shall prepare and deliver to Tenant an amendment to this Lease
(the "Extension Amendment") or, if Landlord is then utilizing a form of lease
different from this Lease, Landlord shall deliver to Tenant a new lease (the
"New Lease"). The Extension Amendment or New Lease shall provide for a Monthly
Rental equal to the fair market rental for the Premises determined by Landlord
according to the rental then being charges for comparable space within the
Sorrento Mesa area. Fair market rental as used above shall include increases
from the initial option rental which are typically included in leases negotiated
at that time.
(d) Objection to Landlord's Determination of Fair Market Rental. If
Tenant objects to Landlord's determination of the fair market rental for the
Premises, Landlord shall appoint a qualified Commercial Real Estate profession
with at least ten (10) years of experience to appraise the Premises (the
"Landlord's Appraisal") for the purpose of determining the fair market rental.
The Landlord's Appraisal shall be the fair market rental for the purpose of
determining the Monthly Rental during the Extension Period. Tenant shall (i)
within five (5) days after the receipt of written notice of the Landlord's
Appraisal employ and pay an MAI appraiser to determine the fair market rental
for the Premises (the "Tenant's Appraisal"), and (ii) within twenty (20) days
thereafter, submit to Landlord, Tenant's Appraisal together with a written
summary of the methods used and data collected to make such determination. If
Landlord's Appraisal and Tenant's Appraisal differ by (i) less than ten percent
(10%), the greater of the two shall be the fair market rental for the Premises
or (ii) more than ten percent (10%), Landlord and Tenant shall promptly instruct
its appraiser to jointly appoint a third MAI appraiser to determine the fair
market rental for the Premises (the "Third Appraisal"). Landlord and Tenant
shall each pay one-half (1/2) of the expenses of the Third Appraisal. The
appraisal among the three (3) that is furthest from the median of all of the
appraisals shall be disregarded and the average of the other two shall be the
fair market rental for the Premises and binding upon Landlord and Tenant. Until
appraisal procedures are final, Landlord and Tenant shall abide by the
provisions of the Extension Amendment or New Lease. Notwithstanding anything to
the contrary herein, by giving written notice to Landlord within five (5) days
of determination of the fair market rental by the appraiser(s), Tenant may
withdraw the exercise of its option and pay the Landlord's share of appraisal
fees, in which case the Lease Term shall terminate upon the Expiration Date.
(e) Time is of the Essence. Time shall be of the essence regarding all
the periods set forth above for the exercise of the option, execution of the
Extension Amendment or New Lease and the objection to the determination of the
fair market rental for the Premises. The failure of Tenant to timely exercise
the option as provided in paragraphs (b) and (c) above shall cause this option
to automatically cease and terminate, and, in such event, this Lease shall
terminate without extension. If Tenant or Landlord fail to timely comply with
the provisions of paragraph (d), the Non-Complying Party shall be deemed to have
accepted the fair market rental as determined by the Complying Party.
(f) It is understood and agreed that this option to extend is personal
to Agouron Pharmaceuticals, Inc., a California corporation, and is not
transferable; in the event of any assignment or subleasing of any or all of the
Premises, this option to extend shall be null and void.
<PAGE>
SIGNTURE PAGE FOLLOWS
"LANDLORD"
Birtcher Property Services as Manager for
Scripps Jack, Ltd., a California corporation
By: /s/ Michael S. Buzar
----------------------------------------
Name: Michael S. Buzar
Title: Senior Vice President
Date: November 13, 1996
By: /s/ Linda L. Bettini
---------------------------------------
Name: Linda L. Bettini, CPM
Title: Vice President
Date: November 13, 1996
"TENANT"
Agouron Pharmaceuticals, Inc., a California
corporation
By: /s/ Glenn Zinser
---------------------------------------
Name: Glenn Zinser
Title: Vice President, Operations
Date: November 8, 1996
By: /s/ Gary Friedman
---------------------------------------
Name: Gary E. Friedman, Esq.
Title: Vice President and General Counsel
Date: November 8, 1996
EXHIBIT 10.34
PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED (DESIGNATED BY AN
ASTERIX (*) AND WHITE SPACE) AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT DATED
JANUARY 31, 1996; FILE NO. 0-15609
THIRD AMENDMENT TO
DEVELOPMENT AND LICENSE AGREEMENT
Effective as of December 1, 1994, Agouron Pharmaceuticals, Inc., a California
corporation ("Agouron") and Japan Tobacco Inc., a Japanese corporation ("JT"),
for good and valuable consideration, agree as follows:
(Terms containing an initial capitalized letter, except as explicitly otherwise
indicated, shall have the meanings stated in the Development and License
Agreement, as defined below).
BACKGROUND
Agouron and JT entered into a Development and License Agreement dated December
1, 1994 and the First and Second Amendments to the Development and License
Agreement. The Development and License Agreement, as amended, is hereinafter
referred to as the "D&L Agreement."
The parties wish to amend and restate certain of the attachments to the D&L
Agreement.
AMENDMENT
1. Agouron and JT hereby agree to amend and restate the below-noted
Attachments to the D&L Agreement to read in full as stated in the
correspondingly-numbered Attachments to this Third Amendment:
Attachment 2 Trademark License Agreement
Attachment 3 Product Manufacturing Specifications
Attachment 4 Royalty Methodology and Accounting Terms/
Definitions
Attachment 6 Premarketing Expenses and Reimbursement
Procedures
2. Except as modified by the terms contained herein, the
provisions of the D&L Agreement shall remain in full force and effect.
AGOURON PHARMACEUTICALS, INC. JAPAN TOBACCO INC.
By: /s/ Gary E. Friedman By: /s/ Masakazu Kakei
-------------------------- ----------------------------
Name: Gary E. Friedman Name: Masakazu Kakei
-------------------------- ----------------------------
Title: Corporate VP & General Title: Executive Director
Counsel Pharmaceuticals
-------------------------- ----------------------------
Date: July 28, 1997 Date: July 9, 1997
-------------------------- ----------------------------
<PAGE>
ATTACHMENT 2
TRADEMARK LICENSE AGREEMENT
This Trademark License, effective as of December 1, 1994, is between Agouron
Pharmaceuticals, Inc., a California corporation ("Agouron"), and Japan Tobacco
Inc., a Japanese corporation ("JT"). Agouron and JT are sometimes hereinafter
referred to as a party (collectively "parties") to this Trademark License.
(Terms containing an initial capitalized letter, except as explicitly otherwise
indicated, shall have the meanings stated in the D&L Agreement, as defined
below).
BACKGROUND
Agouron and JT entered into a Development and License Agreement dated December
1, 1994, and the First and Second Amendments to the Development and License
Agreement. The Development and License Agreement, as now or subsequently
amended, is hereinafter referred to as the "D&L Agreement."
The parties have conducted collaborative development and commercialization
activities for the HIV protease inhibitor nelfinavir mesylate pursuant to the
terms of the D&L Agreement.
The D&L Agreement provides that a form trademark license shall be agreed upon by
the parties and attached to the D&L Agreement as Attachment 2. The D&L Agreement
also contains the following provisions concerning the ownership and utilization
of Trademarks:
Section 1.34 "Trademark(s)" means any trademark selected and owned by a
party and registered by such party, its Affiliate(s) and sublicensee(s)
in the Territory for use in connection with the marketing of Products.
Section 2.01 License Grants.
(k) *
A2-1
<PAGE>
Section 3.03 Trademarks. *
The provisions of Section 2.01(k) of the D&L Agreement were amended by the
Second Amendment to the D&L Agreement to provide that each party *
as such terms are defined in the Letter of Intent ("LOI")
dated January 17, 1997 between Roche and Agouron and JT.
One or both of the parties is the owner(s) of the Viracept Trademark, in certain
countries of the Territory.
The parties intend to use the Viracept Trademark, including its associated
non-English translations (hereinafter collectively referred to as the "Viracept
Trademark"), *
in their respective Exclusive
Territories.
A2-2
<PAGE>
NOW THEREFORE, in accordance with the provisions of the D&L Agreement, for good
and valuable consideration, the parties agree as follows:
TRADEMARK LICENSE
1. Under the provisions of the D&L Agreement, as more
specifically set forth above, each party *
2. The parties' rights in Trademark(s) are *
3. Products marketed using the Viracept Trademark shall be manufactured
strictly in accordance with applicable governmental statutes,
regulations or directives.
4. The licensed user of the Viracept Trademark shall comply with all
applicable governmental statutes, regulations or directives.
5. The licensed user of the Viracept Trademark shall not use the Viracept
Trademark in a manner which is deceptive, or which would bring the
Viracept Trademark, the Product or the other party, into disrepute.
Each party shall use the Viracept Trademark, including its associated
non-English translations, *
6. Pursuant to the terms of the D&L Agreement, *
Provided a party fulfills its obligations and responsibilities related
to Trademark(s) and subject to the terms of the D&L Agreement, such
party shall *
7. Administration of this Trademark license shall be undertaken, in
accordance with the procedures established by Section 4.01 of the D&L
Agreement, *
8. Each party shall, upon learning thereof, promptly notify the other
party in writing of any infringement by a third party of the parties'
rights in the Viracept Trademark, or of any claim or suit by a third
party that the use of the Viracept Trademark infringes or otherwise
violates the rights of a third party. The parties shall *
A2-3
<PAGE>
9. Only the licenses granted pursuant to the express terms of this
Trademark License and the D&L Agreement shall be of any legal force and
effect. No license rights shall be created by implication or estoppel.
10. This Trademark License shall terminate *
11. Any failure by either party to enforce any right which it may have
hereunder in any instance shall not be deemed to waive any right which
it or the other party may have in any other instance with respect to
any provisions of this Trademark License, including the provision which
such party has failed to enforce.
12. In the event that any provision of this Trademark License is judicially
determined to be unenforceable, in whole or in part, the remaining
provisions or portions thereof of this Trademark License shall be valid
and binding to the fullest extent possible, and the parties shall
endeavor to negotiate additional terms, as feasible, in a timely manner
so as to fully effectuate the original intent of the parties, to the
extent possible. Ambiguities, if any, in this Trademark License shall
not be construed against any party, irrespective of which party may be
deemed to have authored the ambiguous provision.
13. This Trademark License and the D&L Agreement constitute the full
agreement of the parties with respect to the subject matter of this
Trademark License, and incorporate any prior discussions between them
with respect to such subject matter. This Trademark License shall not
be amended, supplemented or otherwise modified, except by an instrument
in writing signed by a duly authorized officer of each party.
14. If there is a conflict between the terms of this Trademark License and
the D&L Agreement, the terms of the D&L Agreement shall control.
15. This Trademark License shall be construed, and the rights of the
parties shall be determined, in accordance with *
16. Any notice required or permitted to be given under this Trademark
License shall be in writing and shall be given in person, delivered by
recognized overnight delivery service, sent by mail (certified or
registered, or air mail for addresses outside of the continental U.S.),
or by telefax (or other similar means of electronic communication)
whose receipt is confirmed by confirming telefax, and addressed, in the
case of Agouron, to the President and, in the case of JT, to the Vice
President, Pharmaceutical Division at the respective
A2-4
<PAGE>
addresses shown at the beginning of the D&L Agreement or such other
person and/or address as may have been furnished in writing to the
notifying party in accordance with the provisions of this paragraph.
Except as otherwise provided herein, any notice shall be deemed
delivered upon the earlier of (i) actual receipt, (ii) two (2) business
days after delivery to such overnight express service, (iii) five (5)
business days after deposit in the mail, or (iv) the date of receipt of
the confirming telefax.
17. This Trademark License shall be binding upon all successors in
interest, assigns, trustees and other legal representatives of the
parties.
IN WITNESS WHEREOF, the parties hereto have executed this Trademark License, in
duplicate originals, by their respective officers thereunto duly authorized as
of the day and year hereinabove written.
AGOURON PHARMACEUTICALS, INC. JAPAN TOBACCO INC.
By: /s/ Gary E. Friedman By: /s/ Masakazu Kakei
Name: Gary E. Friedman, Esq. Name: Masakazu Kakei
Title: Vice President and Title: Executive Director
General Counsel Pharmaceuticals
A2-5
<PAGE>
ATTACHMENT 3
PRODUCT MANUFACTURING SPECIFICATIONS
THE TERMS OF THE PRODUCT MANUFACTURING SPECIFICATIONS ARE THOSE CONTAINED IN
THE APPLICABLE REGISTRATION FILING FOR THE PRODUCT, AS AMENDED
A3-1
<PAGE>
ATTACHMENT 4
ROYALTY METHODOLOGY AND ACCOUNTING TERMS
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A4-1
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2. *
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3. *
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4. *
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(a) *
(b) *
(c) *
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A4-2
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6. *
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8. *
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(i) *
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A4-SA-1
<PAGE>
(iv) *
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A4-SA-2
<PAGE>
*
A4-SA-3
<PAGE>
ATTACHMENT 6
PREMARKETING EXPENSES AND REIMBURSEMENT PROCEDURES
THE DETAILS RELATING TO THE DEFINITION AND TREATMENT OF PREMARKETING EXPENSES *
A6-1
EXHIBIT 10.35
PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED (DESIGNATED BY AN ASTERIX (*) AND
WHITE SPACE) AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT DATED AUGUST 21, 1997;
FILE NO. 0-15609
SECOND AMENDMENT TO
DEVELOPMENT AND LICENSE AGREEMENT
Effective as of January 17, 1997, Agouron Pharmaceuticals, Inc., a California
corporation ("Agouron") and Japan Tobacco Inc., a Japanese corporation ("JT"),
for good and valuable consideration, agree as follows:
(Terms containing an initial capitalized letter, except as explicitly otherwise
indicated, shall have the meanings stated in the Development and License
Agreement, as defined below).
BACKGROUND
Agouron and JT entered into a Development and License Agreement dated December
1, 1994 and the First Amendment to the Development and License Agreement. The
Development and License Agreement, as amended is hereinafter referred to as the
"D&L Agreement."
The parties have conducted collaborative development activities pursuant to the
terms of the D&L Agreement.
Agouron and JT contemplated that a joint venture, to be formed pursuant to the
terms of the D&L Agreement, would act as the licensor to implement the
commercialization of the Compound and/or Products in the Joint Venture Exclusive
Territories. The parties further contemplated that the joint venture would not
directly conduct actual manufacturing or sales of the Compound and/or Products
but would only manage sublicensing activities for the Compound and/or Products
to a number of sublicensees.
A single third party has been identified which desires to sublicense the Product
in the Joint Venture Exclusive Territories pursuant to the terms of a Letter of
Intent ("LOI") dated January 17, 1997 between such third party (hereinafter
referred to as "Third Party Licensee") and Agouron and JT.
AMENDMENT
Agouron and JT now wish to amend the D&L Agreement as follows:
1. The Joint Venture, as set forth in Attachment 1 to the D&L Agreement,
is hereby retroactively dissolved effective as of January 1, 1996.
2. Upon dissolution of the Joint Venture and notwithstanding any other
provisions of the D&L Agreement, the rights granted to the Joint
Venture shall revert to the parties.
<PAGE>
3. Agouron agrees to enter into the LOI under which Agouron will grant to
the Third Party Licensee under its applicable intellectual property
rights the exclusive right, even as to Agouron (with right of
sublicense) to sell the Product in the Field in the Licensed Territory,
as such terms are defined in the LOI.
4. JT agrees to enter into the LOI under which JT will grant to the Third
Party Licensee under its applicable intellectual property rights the
exclusive right, even as to JT, (with right of sublicense) to sell the
Product in the Field in the Licensed Territory, as such terms are
defined in the LOI.
5. Subject to the terms of the D&L Agreement, Agouron and JT will share
obligations and responsibilities related to the license to the Third
Party Licensee. Administration of such license will be undertaken in
accordance with the procedures established by Section 4.01 of the D&L
Agreement by *
6. In the event that the license to the Third Party Licensee terminates or
becomes void in the future, JT and Agouron agree that rights to sell
the Product in the Field in the Joint Venture Exclusive Territories, as
such terms are defined in the LOI, shall *
provided, however, the parties agree to
jointly determine *
7. The provisions of Section 2.01(k) are amended to provide that each
party hereby *
as
such terms are defined in the LOI.
8. Section 5.03 is amended to read in full as follows:
Section 5.03 Premarketing Expenses. Premarketing
Expenses shall mean those
*
Premarketing Expenses shall be deemed to be *
and shall be treated in accordance with Attachment 4 to the
D&L Agreement.
2
<PAGE>
9. Section 5.04(b) is amended to provide that *
10. Agouron and JT agree to share the * pursuant to
the provisions of Paragraph 29 of the LOI as follows: the first *
the remaining * shall
be shared equally by Agouron and
JT.
11. Except as modified by the terms contained herein, the provisions of
the D&L Agreement shall remain in full force and effect.
AGOURON PHARMACEUTICALS, INC. JAPAN TOBACCO INC.
By: /s/ Gary E. Friedman, Esq. By: /s/ Tatsuya Yoneyama
Name: Gary E. Friedman, Esq. Name: Tatsuya Yoneyama
Title: Vice President and Title: Vice President,
General Counsel Pharmaceuticvals Div
Date: 1/17/97 Date: 1/29/1997
3
EXHIBIT 10.37
PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED
(DESIGNATED BY AN ASTERIX (*) AND WHITE
SPACE) AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT
DATED AUGUST 21, 1997; FILE NO. 0-15609
AG3340
DEVELOPMENT AND LICENSE AGREEMENT
BETWEEN
F. HOFFMANN-LA ROCHE LTD AND HOFFMANN-LA ROCHE INC.
AND
AGOURON PHARMACEUTICALS, INC.
June 11, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page No.
<S> <C>
BACKGROUND...................................................................................................1
ARTICLE I DEFINITIONS..............................................................................1
Section 1.01 Affiliate................................................................................2
Section 1.02 Agouron Patent Rights....................................................................2
Section 1.03 Agouron Technology.......................................................................2
Section 1.04 Allowable Expenses.......................................................................2
Section 1.05 *........................................................................................2
Section 1.06 Combination Product......................................................................2
Section 1.07 Compound or AG3340.......................................................................2
Section 1.08 Co-Promote...............................................................................3
Section 1.09 Control, Controlled or Controlling.......................................................3
Section 1.10 Development Costs........................................................................3
Section 1.11 Development Program......................................................................3
Section 1.12 Development Program Patent Rights........................................................3
Section 1.13 Development Program Technology...........................................................4
Section 1.14 Dossier..................................................................................4
Section 1.15 Effective Date...........................................................................4
Section 1.16 European Co-Promotion Countries..........................................................4
Section 1.17 Global Joint Development Committee.......................................................4
Section 1.18 Global Joint Finance Committee...........................................................4
Section 1.19 Global Joint Marketing Committee.........................................................5
Section 1.20 Initial Commercial Sale..................................................................5
Section 1.21 Marketing Company........................................................................5
Section 1.22 Net Sales................................................................................5
(a) Adjusted Gross Sales..............................................................5
(b) Net Sales.........................................................................5
Section 1.23 *........................................................................................5
Section 1.24 North American Territory.................................................................6
Section 1.25 Patent Rights............................................................................6
Section 1.26 Product..................................................................................6
Section 1.27 Profits and Losses.......................................................................6
Section 1.28 Registration.............................................................................6
Section 1.29 Roche Technology.........................................................................6
Section 1.30 Roche Territory..........................................................................6
Section 1.31 Syntex Agreement.........................................................................6
Section 1.32 Territory................................................................................6
Section 1.33 Trade Dress..............................................................................6
Section 1.34 Trademark(s).............................................................................6
Section 1.35 United States............................................................................7
i
<PAGE>
TABLE OF CONTENTS
(Continued)
Page No.
<S> <C>
ARTICLE II COMMERCIAL RIGHTS........................................................................7
Section 2.01 License Grants...........................................................................7
Section 2.02 Non-Cancer Indications of the Compound and Other Chemical
Compounds Covered by Claims Included in the Agouron Patent Rights........................10
Section 2.03 Diligent Efforts to Develop and Market..................................................11
Section 2.04 Discontinuance of the Development Program...............................................11
ARTICLE III SHARING AND PROTECTION OF INTELLECTUAL PROPERTY.........................................12
Section 3.01 Patents.................................................................................12
Section 3.02 Infringement of Patents of Third Parties................................................14
Section 3.03 Trademarks..............................................................................14
Section 3.04 Information Exchange....................................................................15
Section 3.05 Confidentiality.........................................................................15
Section 3.06 Publication.............................................................................16
ARTICLE IV MANAGEMENT STRUCTURE OF COLLABORATION...................................................17
Section 4.01 Management Committees...................................................................17
Section 4.02 Development and Registration............................................................18
Section 4.03 Marketing...............................................................................21
Section 4.04 Supply of Compound and Product..........................................................26
Section 4.05 Research Activities.....................................................................27
ARTICLE V LICENSE FEES, PROFIT AND LOSS SHARING AND ROYALTIES;
DEVELOPMENT COSTS; PREMARKETING EXPENSES;
GENERAL LICENSING TERMS.................................................................27
Section 5.01 License Fees, Profit and Loss Sharing and Royalties.....................................28
Section 5.02 Development Costs.......................................................................29
Section 5.03 Premarketing Expenses...................................................................30
Section 5.04 General Licensing Terms.................................................................31
Section 5.05 Foreign Currency........................................................................37
ARTICLE VI TERM AND TERMINATION....................................................................38
Section 6.01 Termination for Breach..................................................................38
Section 6.02 Termination by Roche....................................................................38
Section 6.03 Termination by Mutual Agreement.........................................................39
Section 6.04 Termination Upon Bankruptcy.............................................................39
Section 6.05 Disposition of Inventory................................................................39
Section 6.06 Effect of Termination...................................................................39
ii
<PAGE>
TABLE OF CONTENTS
(Continued)
Page No.
<S> <C>
ARTICLE VII WARRANTIES AND COVENANTS; INDEMNITIES; INSURANCE;
DISPUTE RESOLUTION; GOVERNMENTAL APPROVALS;
EXPORT CONTROLS.........................................................................40
Section 7.01 Warranties and Covenants................................................................40
Section 7.02 Indemnities; Insurance..................................................................41
Section 7.03 Dispute Resolution......................................................................42
Section 7.04 Governmental Approvals..................................................................43
Section 7.05 Export Controls.........................................................................43
ARTICLE VIII DISCLOSURE OF AGREEMENT.................................................................43
Section 8.01 Disclosure of Agreement.................................................................43
ARTICLE IX GENERAL PROVISIONS......................................................................43
Section 9.01 No Implied Licenses.....................................................................43
Section 9.02 No Waiver...............................................................................44
Section 9.03 Severability; Government Acts...........................................................44
Section 9.04 Ambiguities.............................................................................44
Section 9.05 Notification of Authorities.............................................................44
Section 9.06 No Agency...............................................................................44
Section 9.07 Captions; Number; Official Language.....................................................44
Section 9.08 Force Majeure...........................................................................44
Section 9.09 Amendment...............................................................................45
Section 9.10 Applicable Law..........................................................................45
Section 9.11 Notices.................................................................................45
Section 9.12 Assignment..............................................................................45
Section 9.13 Succession..............................................................................46
APPENDICES
Schedule 1 Agouron Patent Rights............................................................S1-1
Schedule 2 Agouron Patent Rights Compounds..................................................S2-1
Schedule 3 Section 7.01(c) Exclusion List...................................................S3-1
Exhibit 1 Initial Development Plan for AG3340 Development Program..........................E1-1
Schedule 1 AG3340 Strategic Development Plan................................E1-S1-1
Exhibit 2 Initial Development Budget for AG3340 Development Program........................E2-1
Attachment 1 Development Costs and Reimbursement Procedures...................................A1-1
Schedule 1 Agouron/Roche Development Program Expenditures...................A1-S1-1
Schedule 2 Agouron Development Cost Invoice.................................A1-S2-1
Schedule 3 Roche Development Cost Invoice...................................A1-S3-1
Attachment 2 Accounting Terms/Definitions.....................................................A2-1
Attachment 3 Product Manufacturing Specifications.............................................A3-1
Attachment 4 Trademark License Agreement......................................................A4-1
iii
</TABLE>
<PAGE>
This AG3340 Development and License Agreement ("Agreement"), dated for
reference purposes only this 11th day of June 1997, is by and between Agouron
Pharmaceuticals, Inc., a corporation duly organized and existing under the laws
of the state of California, having a principal place of business at 10350 North
Torrey Pines Road, La Jolla, California, United States of America (hereinafter
referred to as "Agouron," the first party), and F. Hoffmann-La Roche Ltd, a
corporation duly organized and existing under the laws of Switzerland, having a
principal place of business at CH-4002-Basel, Switzerland, and Hoffmann-La Roche
Inc., a corporation duly organized and existing under the laws of the state of
New Jersey, having a principal place of business at 340 Kingsland Street,
Nutley, New Jersey, United States of America (hereinafter collectively referred
to as "Roche," the second party). Agouron and Roche are sometimes hereinafter
each referred to as a party (collectively "parties") to this Agreement.
BACKGROUND
On June 19, 1996, Agouron and Roche entered into a Letter of Intent
("LOI") to confirm the parties formation of a collaboration on terms
substantially in accordance with those contained in Exhibit A to the LOI
("Exhibit A"). A component of such collaboration includes the development and
commercialization of the chemical compound known as AG3340 ("AG3340"), which was
invented by Agouron employees. While Exhibit A states the basic terms of the
understanding between the parties, the parties agreed that the terms of the
collaboration would be subject to further negotiation and preparation of further
agreements containing the full terms of the collaboration between the parties.
This Agreement is entered into for the purpose of setting forth the definitive
terms under which the parties shall collaborate in the development and
commercialization of AG3340 products.
NOW, THEREFORE, in consideration of the premises, and the mutual
covenants, benefits and obligations set forth herein, the parties agree as
follows:
ARTICLE I - DEFINITIONS
When used in this Agreement, each of the following terms shall have the
meaning set out in this Article I. All references to Articles, Attachments,
Sections, Schedules, Exhibits and Appendices shall, except as otherwise
explicitly provided, refer to the Articles, Attachments, Sections, Schedules,
Exhibits and Appendices of this Agreement, all of which are incorporated herein
by reference.
Section 1.01 "Affiliate" means any person, organization or entity which
is, directly or indirectly, controlling, controlled by, or under common control
with Roche or Agouron, as the case may be. The term "control" (including, with
correlative meaning, the terms "controlled by" and "under common control with"),
as used with respect to any person or entity, means the possession, directly or
indirectly, of the power to direct, or cause the direction of, the management
and policies of such person, organization or entity, whether through the
ownership of voting securities, or by contract or court order or otherwise. The
ownership of voting securities of a person, organization or entity shall not, in
and of itself, constitute "control" for
1
<PAGE>
purposes of this definition, unless said ownership is of a majority of the
outstanding securities entitled to vote of such a person, organization or
entity. For purposes of this Agreement, Genentech, Inc. shall be considered to
be an Affiliate of Roche.
Section 1.02 "Agouron Patent Rights" means: (i) *
Section 1.03 "Agouron Technology" means *
Section 1.04 "Allowable Expenses" has the meaning described in
Schedule 1 to Attachment 2.
Section 1.05 *
Section 1.06 "Combination Product" means any *
Section 1.07 "Compound" or "AG3340" means the chemical compound
known as AG3340, whose chemical name is as follows:
*
2
<PAGE>
Section 1.08 "Co-Promote" means the right of a party, subject to
applicable law, to *
The term
"Co-Promote" as used above, shall include the *
Section 1.09 "Control," "Controlled" or "Controlling" means *
Section 1.10 "Development Costs" has the meaning described in
Section 5.02 and Attachment 1.
Section 1.11 "Development Program" means all *
Section 1.12 "Development Program Patent Rights" means *
3
<PAGE>
Section 1.13 "Development Program Technology" means any *
Section 1.14 "Dossier" means the document which is filed with and
approved by a government or health authority for purposes of Registration, for
example, a New Drug Application or a Marketing Authorization Application.
Section 1.15 "Effective Date" means June 19, 1996.
Section 1.16 "European Co-Promotion Countries" means *
Section 1.17 "Global Joint Development Committee" has the meaning set
forth in Section 4.01.
Section 1.18 "Global Joint Finance Committee" has the meaning set forth
in Section 4.01.
4
<PAGE>
Section 1.19 "Global Joint Marketing Committee" has the meaning set
forth in Section 4.01.
Section 1.20 "Initial Commercial Sale" means the first commercial
sale of a Product arising out of the Development Program for *
Section 1.21 "Marketing Company" means the company marketing a
Product in a country; provided, however, that if the *
Section 1.22 "Net Sales" and the related term "Adjusted Gross Sales"
shall have the following meanings:
(a) "Adjusted Gross Sales" means the *
(b) "Net Sales" means the amount calculated by subtracting from
the amount of Adjusted Gross Sales *
Section 1.23 *
5
<PAGE>
Section 1.24 "North American Territory" means the United States of
America, Canada and Mexico.
Section 1.25 "Patent Rights" means, collectively, *
Section 1.26 "Product" means any *
Section 1.27 "Profits and Losses" have the meanings set forth in
Schedule 1 to Attachment 2.
Section 1.28 "Registration" means the official approval by the
government or health authority in a country (or supra-national organizations,
such as the European Agency for the Evaluation of Medical Products) which is
required for a Product to be offered for sale in such country, including such
authorizations as may be required for the production, importation, pricing,
reimbursement and sale of such Product, and for subsequent regulatory filings
for line extensions and/or additional indications of such Product.
Section 1.29 "Roche Technology" means any *
Section 1.30 "Roche Territory" means *
Section 1.31 "Syntex Agreement" means the Agreement between Syntex
(U.S.A.) Inc. and Agouron dated June 8, 1993, as amended.
Section 1.32 "Territory" means *
Section 1.33 "Trade Dress" means any materials supporting the
commercialization of a Product, including, but not limited to, packaging,
package inserts, advertising or selling aids, brochures, mailings and/or other
marketing or packaging materials. The definition of Trade Dress shall not refer
to trade names used by a party to designate the name of such party.
Section 1.34 "Trademark(s)" means any trademark selected and owned by a
party and registered (or applied for) by such party, its Affiliate(s) and
sublicensee(s) in the Territory for
6
<PAGE>
use in connection with the marketing of Products. The definition of Trademark(s)
shall not refer to trade names used by a party to designate the name of such
party.
Section 1.35 "United States" means the United States of America, its
territories, possessions and protectorates (including Puerto Rico), and the
District of Columbia.
ARTICLE II - COMMERCIAL RIGHTS
Section 2.01 License Grants. To implement the commercialization of the
Compound and/or Products arising out of the Development Program (including the
research activities conducted by the parties pursuant to the provisions of
Section 4.05), the parties, subject to the other applicable obligations of this
Agreement, grant and accept the license rights provided below in this Article
II.
(a) *
(b) *
(c) *
(d) In accordance with the provisions of Section 4.03, the parties
agree, unless prohibited by law or regulation, to *
(e) *
7
<PAGE>
(i) *
(ii) *
(f) *
8
<PAGE>
(g) *
(h) *
(i) *
(j) Notwithstanding anything to the contrary contained in this
Agreement, each party agrees to sell the Compound and/or Products for non-human
pharmaceutical uses only with the written agreement of the other party.
(k) *
(l) *
9
<PAGE>
(m) *
Section 2.02 Non-Cancer Indications of the Compound and Other
Chemical Compounds Included Within the Agouron
Patent Rights.
(a) Subject to the terms of the Syntex Agreement, except as provided in
Section 2.02(b) and Section 4.02(o), Agouron, in its sole discretion, shall be
entitled to make, use,
10
<PAGE>
develop and commercialize the Compound and other chemical compounds included
within the Agouron Patent Rights for non-cancer indications.
(b) *
Section 2.03 Diligent Efforts to Develop and Market. The right of Roche
to market Products for cancer indications in all countries comprising the Roche
Territory shall be subject to diligent development and marketing efforts by
Roche, on a country-by-country basis. For purposes of this Section 2.03,
commercialization efforts undertaken by Roche's Affiliates and sublicensees
shall be attributed to Roche. Roche shall begin commercial sales of at least one
(1) Product arising out of the Development Program for cancer indications in a
country no later than one (1) year after the first Registration of such Product
for cancer indications in such country; provided, however, that such period
shall be extended for as long as diligent efforts to begin commercial sales
continue. Following commencement of commercial sales in a country, Roche shall
keep such Product reasonably available to the public for cancer indications;
provided, however, that Roche shall be released from this obligation if supply
of the Product for cancer indications is not available for such country and
Roche is not responsible for arranging for the commercial production and supply
of such Product for such country. Roche agrees to use diligent efforts to market
which are comparable to the efforts it then uses with its own cancer products.
If, after one hundred twenty (120) days written notice of a failure: (i) to
begin commercial sales of at least one (1) such Product for cancer indications
in a country in a timely manner; or (ii) following commencement of commercial
sales in a country, to keep such Product reasonably available to the public for
cancer indications, Roche fails to fulfill its obligation under this Section
2.03, Agouron shall have the right, as the sole and exclusive remedy for such
failure, to elect to have the licenses granted to Roche in such country under
the terms of Section 2.01(a) converted to a non-exclusive license to both
parties. Both parties, under such non-exclusive license, shall have the right
(with right of sublicense) to manufacture, use, offer for sale, sell and/or
import in or into such country such Product for cancer indications under
applicable Agouron Patent Rights, New MMP Compound Patent Rights and Development
Program Patent Rights, and using applicable Agouron Technology, Roche Technology
and Development Program Technology. Agouron, its Affiliates and sublicensees
shall have no royalty or other obligations to Roche resulting from the
manufacture, use, offer for sale, sale and/or import in or into such country of
such Product by Agouron, its Affiliates and sublicensees. No additional
consideration shall be due because of the exercise by Agouron of such election.
Section 2.04 Discontinuance of the Development Program. *
11
<PAGE>
ARTICLE III - SHARING AND PROTECTION OF INTELLECTUAL PROPERTY
Section 3.01 Patents.
(a) *
(b) *
12
<PAGE>
(c) *
(d) *
(e) *
(f) *
13
<PAGE>
Section 3.02 Infringement of Patents of Third Parties. Each party, its
Affiliates and sublicensees, and their respective employees and agents shall use
diligent efforts to avoid infringement of patents of any third party in
discovering, developing, manufacturing and commercializing the Compound,
intermediates thereof and/or Products. However, neither party, its Affiliates
and sublicensees, and their respective employees and agents shall be liable to
the other party, its Affiliates and sublicensees, and their respective employees
and agents if the practice of the Patent Rights, Agouron Technology, Roche
Technology, and/or Development Program Technology in discovering, developing,
manufacturing or commercializing the Compound, intermediates thereof and/or
Products infringe any patent of any third party. If either party becomes aware
of any claim or suit by any third party for infringement of a patent of such
third party in connection with the discovery, development, manufacture, use or
sale of the Compound, intermediates thereof and/or Products by a party hereto,
such party shall notify the other party in writing of such claim or suit within
thirty (30) days thereafter. Each party agrees to render such reasonable
assistance as the other party may request in defending any such claim or suit.
The parties shall mutually agree to any settlement of any existing or potential
infringement claim or action that would require the payment of any royalty or
lump sum payment to a third party, except that if the parties cannot promptly
reach agreement, they shall appoint an independent patent counsel to give an
opinion, which shall be binding on the parties, as to whether there is a
substantial risk that the third party patent is both valid and infringed. If the
opinion is that there is a substantial risk that the patent is both valid and
infringed, the marketing party of a Product in a country, after consultation
with the other party, may settle the matter in its sole discretion on such terms
as it deems appropriate. If both parties are participating in the marketing of a
Product in a country, the parties shall mutually agree to any settlement of any
infringement claim or action that would require the payment of any royalty or
lump sum payment to a third party; if the parties are unable to mutually agree
on the settlement, then the issue shall be decided by binding arbitration in
accordance with the provisions of Section 7.03 hereof. Unless the parties agree
otherwise, the costs of defending or settling any such claim or action in a
country where the parties are sharing Profits and Losses from the sales of such
Product shall be a deductible expense when calculating Profits and Losses for
such Product for such country. *
Section 3.03 Trademarks. *
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Section 3.04 Information Exchange.
(a) *
(b) *
Section 3.05 Confidentiality. Except as otherwise expressly specified
in this Agreement and except for the proper exercise of any license rights
granted or rights reserved under this Agreement, Roche and Agouron shall keep in
confidence and shall each use its best
15
<PAGE>
efforts to cause its respective Affiliates, employees, directors, agents,
consultants, clinical research associates, outside contractors, clinical
investigators and sublicensees to whom it is permitted to disclose information
pursuant to the terms of this Agreement to retain in confidence: (i) all
confidential and proprietary information of the other party, including *
and/or the marketing and business plans of such other party that is disclosed to
it hereunder; and (ii) Development Program Technology. Without limiting the
foregoing, Roche and Agouron shall each exercise the same degree of diligence
and care with respect to the above-described information as it exercises with
respect to its other proprietary information. Each party represents to the other
party that it maintains policies and procedures designed to prevent the
unauthorized disclosure of its proprietary data and information. Agouron shall
be responsible, under the direction of the Global Joint Development Committee,
for authorizing the supply of any drug samples of the Compound and/or Products
to third party researchers. Roche and Agouron shall each be entitled to disclose
the above-described information to consultants, clinical research associates,
outside contractors, collaborators, clinical investigators and other third
parties who are engaged, in accordance with the procedures established under
Section 4.02(h), and who are subject to confidentiality and use obligations
equivalent to those applicable to the disclosing party hereunder, and to
governmental or other regulatory and/or health authorities, to the extent that
such disclosure is reasonably necessary to obtain patents, to obtain
authorization or to conduct clinical trials on the Compound or Products, to
prepare the Dossier and/or otherwise to fulfill its obligations pursuant to this
Agreement. Roche and Agouron shall also have the right to disclose Development
Program Technology to persons it proposes to enter into business relationships
with, if such persons are subject to confidentiality obligations equivalent to
those applicable to the disclosing party hereunder. The preceding obligations of
confidentiality shall be waived as to information which the party claiming
waiver can demonstrate, based on written records: (i) is in the public domain at
the time of disclosure hereunder; (ii) comes into the public domain through no
fault of the party claiming waiver; (iii) was known to the party claiming waiver
prior to its disclosure under this Agreement, unless such information was
obtained from the other party on a confidential basis; (iv) is disclosed on a
non-confidential basis to the party claiming waiver by a third party having a
lawful right to make such disclosure on a non-confidential basis; (v) is
published with the prior mutual agreement of the parties after having given
consideration to appropriate commercial and competitive factors; (vi) comes into
the public domain through governmental publication of a patent application; or
(vii) is required to be disclosed to file a patent or other regulatory
application or to comply with applicable laws and regulations. The obligations
under this Section 3.05 shall survive to the later of: (i) ten (10) years after
the end of the Development Program; or (ii) the termination or expiration date
of the last to expire of any license(s) granted pursuant to this Agreement, to
the extent the Development Program Technology, Agouron Technology or Roche
Technology is applicable to the practice of grants under such license(s); or
(iii) the expiration date of the last to expire of any patent(s) within the
Patent Rights on a Product.
Section 3.06 Publication. Agouron and Roche each acknowledge the other
party's interest in publishing certain of its results of the Development Program
to obtain recognition within the scientific community and to advance the state
of scientific knowledge. Both parties also recognize their mutual interests in
obtaining valid patent protection for the Compound, intermediates thereof and
Products. Consequently, either party, its employees or consultants wishing to
make a publication shall provide the other party the opportunity to review a
draft
16
<PAGE>
manuscript at least thirty (30) days prior to the date of the intended
submission for publication and, upon the other party's written request, shall
delay submission for a period (not greater than forty-five (45) days from the
date of such written request) sufficient to provide for the filing of
appropriate patent application(s) for any patentable subject matter disclosed in
such publication. Furthermore, in acknowledgment that certain Development
Program Technology, while not of a patentable subject matter, could be necessary
for the protection of the commercial interests of the parties, the parties agree
that the Global Joint Development Committee or its delegates shall review in a
timely manner (not greater than thirty (30) days from the date of a written
request to the Global Joint Development Committee or its delegates) a draft
manuscript, and propose the conditions under which the portion of the
Development Program Technology disclosed in the draft manuscript that could be
necessary to protect the commercial interests of the parties can be published.
If the Global Joint Development Committee or its delegates do not object to the
publication within thirty (30) days from the date of such written request, the
requesting party (subject to the other party's right to request the 45-day delay
described above for patentable subject matter disclosed in such publication)
shall be free to publish such manuscript. If the Global Joint Development
Committee or its delegates object to the publication of a portion of the draft
manuscript, it shall indicate specifically what modification to the draft
manuscript it believes is appropriate to protect the commercial interests of the
parties and the reasons therefor. After giving reasonable consideration to the
suggestions of the Global Joint Development Committee, the party wishing to make
a publication shall have the final authority to determine the scope, timing and
content of the publication.
ARTICLE IV - MANAGEMENT STRUCTURE OF COLLABORATION
Section 4.01 Management Committees. The collaborative development and
commercialization effort for the Compound and Products arising out of the
Development Program for cancer indications shall be coordinated and overseen by
four (4) committees, namely:
(a) A joint committee responsible to discuss and coordinate
the global development efforts directed to Registration of Products for
cancer indications (hereinafter referred to as the "Global Joint
Development Committee").
(b) A joint committee responsible to discuss and coordinate
the global marketing of Products for cancer indications (hereinafter
referred to as the "Global Joint Marketing Committee").
(c) A joint committee responsible to oversee and approve the
planning and budgeting of revenues and costs resulting from
Co-Promotional activities if the parties are Co-Promoting Products
(hereinafter referred to as the "Global Joint Finance Committee").
(d) A joint committee responsible, inter alia, to discuss and
coordinate the research activities described in Section 4.05
(hereinafter referred to as the "Joint Research Committee").
These committees (and the project teams established by such committees) shall
work in close cooperation.
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Section 4.02 Development and Registration. Roche and Agouron
acknowledge their mutual intention generally to take a collaborative,
commercially reasonable approach to the timely development of the Compound and
Products arising out of the Development Program for cancer indications. The
parties further acknowledge their mutual willingness to discuss ad hoc
agreements to establish appropriate mechanisms for such collaborative
development. Recognizing the importance of timely initiation of development
activities, however, Roche and Agouron agree to the following basic approach to
development of Products for cancer indications and to the conduct of the Global
Joint Development Committee activities.
(a) The Global Joint Development Committee shall meet in regular
intervals, at least
* and shall be co-chaired by representatives from
Roche and Agouron. Each party shall be entitled to participate in decisions
affecting the Development Program and to attend all key development-related
meetings. The meeting locations of the Global Joint Development Committee shall
* facilities, or at other sites as agreed to by the
parties. Meeting minutes shall be promptly prepared and approved by designated
representatives of each of the parties. Each party shall pay all of its
respective expenses for such meetings.
(b) *
Each party shall also designate a
financial advisor to the Global Joint Development Committee. Each party's
members of the Global Joint Development Committee shall reasonably consider the
adoption of the other party's development suggestions, and shall accept as many
of such development suggestions as are reasonable, based upon medical and
business rationale, drug supply, and the need to conduct the development
activities in an expeditious manner. If the parties agree, an authorized
sublicensee for a Compound which is participating in the development of such
Compound may participate in such discussions.
(c) If the Global Joint Development Committee is unable to reach
agreement on any decision required of it, the issue shall be submitted for
consideration, *
If they are unable to
agree, then the issue shall be resolved by *
(d) The decisions of the Global Joint Development Committee shall be
binding on the parties and shall be confirmed in writing by designated
representatives of each of the parties.
(e) The Global Joint Development Committee shall be responsible for the
coordination of the global collaborative development efforts directed to
Registration of Products arising out of the Development Program for cancer
indications in the Territory and such other matters which the parties mutually
agree to assign to it. The Global Joint Development Committee may, if necessary,
* provided, however, that the Development Program shall be designed for the
purpose of achieving Registration of Products for cancer indications in an
expeditious manner including the *
The Global Joint
18
<PAGE>
Development
Committee shall also have the authority to make decisions concerning *
arising out of the Development Program for cancer indications. Additionally, the
Global Joint Development Committee shall establish reasonable publication
procedures concerning Development Program Technology and, upon the request of a
party, the Global Joint Development Committee or its delegates shall review a
draft manuscript and propose the conditions under which the portion of the
Development Program Technology disclosed in the draft manuscript which is
necessary to protect the commercial interests of the parties can be published.
(f) The Global Joint Development Committee shall review and
discuss the Development Program for any country(s) involved, *
Development of Products arising out of the Development Program
for cancer indications shall be initially based upon the *
and other development activities to be performed by each of the parties. The
Global Joint Development Committee shall review and discuss any projected change
in a quarterly operating budget which exceeds the previously budgeted amount by
more than * The parties acknowledge that, while the initial
worldwide development plan and development budget are designed to achieve
Registration of Products arising out of the Development Program for cancer
indications in many countries of the Territory, it will be necessary to
supplement the initial development budget to achieve Registration in other
countries of the Territory. The Global Joint Development Committee shall * shall
be attached to this Agreement as updated Exhibits. To the extent possible, the
Development Program shall provide for the generation and use of data which can
be utilized to achieve Registration * Specific information which is required to
achieve Registration in individual countries shall be provided for, to the
extent possible, in the Development Program. Each party's members of the Global
Joint Development Committee, in addition to the joint development of AG3340,
will consider and discuss in good faith *
(g) Roche and Agouron shall collaborate to complete clinical studies
aimed at achieving Registration of Products arising out of the Development
Program *
During the conduct of the Development Program, the Global
Joint Development Committee shall assign study or other development activities
of the Development Program (including deployment of human and financial
resources) among the parties, principally based upon: *
a party not responsible for a
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<PAGE>
development activity may provide advisory and support services to the other
party. *
(h) Roche and Agouron shall each use qualified persons in the
development activities of the Development Program. In accordance with procedures
to be established by the Global Joint Development Committee, Agouron and Roche
may also engage consultants, clinical research associates, outside contractors,
collaborators, clinical investigators and other third parties, as may be
necessary or desirable, to assist them in carrying out their responsibilities
under the Development Program.
(i) All work in connection with the development of the Compound or
Products, to the extent required by applicable laws or regulations, shall be
conducted in accordance with Good Laboratory Practices, Good Manufacturing
Practices and Good Clinical Practices, as such rules of practice are amended
from time to time.
(j) Roche and Agouron, through the Global Joint Development Committee,
shall keep each other informed of the progress of the work being performed by
them pursuant to the Development Program. This shall include progress reports as
required by the Global Joint Development Committee *
Agouron and Roche shall provide
each other with access to its relevant records and facilities to permit a
reasonable review of the progress, from time to time, of the activities being
performed by such party pursuant to the Development Program.
(k) Each party's members of the Global Joint Development Committee
shall report and make recommendations to their managements regarding the matters
discussed at the meetings of the Global Joint Development Committee.
(l) Each party agrees to use its diligent efforts in responding in a
timely manner, but not more than thirty (30) days, to requests from the other
party for preclinical and clinical results and other information concerning the
Development Program to enable the other party to comply with regulatory
requirements for the Development Program. To the extent possible, the parties
shall * in the clinical studies aimed at achieving Registration of Products
arising out of the Development Program for cancer indications.
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(m) After consultation with Roche concerning the selection of a generic
name for the Compound, Agouron shall have responsibility for making application
to the World Health Organization International Non-proprietary Name Committee
and the U.S. Adopted Names Council to secure a generic name for the Compound.
(n) Subject to the other provisions of this Agreement (including
Section 5.04(b)), in the Roche Territory, * for a Product arising out of the
Development Program for cancer indications shall * in the North American
Territory, * for a Product arising out of the Development Program for cancer
indications *
Prior to Registration of a Product arising out of the Development Program for
cancer indications in a country, the party
*
on such Product for cancer indications, including communicating with health
and/or regulatory authorities in such country; provided, however, to the extent
reasonably possible, the other party shall have the right to review, comment and
participate in communications concerning such Product with health and/or
regulatory authorities in such country. Notwithstanding the preceding, each
party shall be entitled to have *
as may be necessary to obtain and maintain
the Registration on a Product arising out of the Development Program for
cancer indications in any other country in the Territory.
(o) *
Section 4.03 Marketing. The *
Roche and Agouron agree to the following basic approach to marketing of Products
for cancer indications and the conduct of the Global Joint Marketing Committee
activities.
(a) The Global Joint Marketing Committee shall meet in regular
intervals, at least * per year, and shall be co-chaired by
representatives from Roche and Agouron. Each party shall be entitled to
participate in discussions affecting the marketing of Products arising out of
the Development Program for cancer indications in the Territory and to attend
all key marketing-related meetings. The meeting locations of the Global Joint
Marketing Committee shall * or at other sites as agreed to by the parties.
Meeting minutes shall be promptly prepared and approved by designated
representatives of each of the parties. Each party shall pay all of its
respective expenses for such meetings.
(b) *
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Each party shall
also designate a financial advisor to the Global Joint Marketing Committee.
If the parties agree, an authorized sublicensee for a Product may participate in
such discussions.
(c) If the Global Joint Marketing Committee is unable to reach
agreement on any decision required of it, the issue shall be submitted for
consideration, *
If they are unable to agree, then the issue shall be resolved by the *
(d) A decision of the Global Joint Marketing Committee shall be binding
on the parties, and shall be confirmed in writing by designated representatives
of each of the parties.
(e) The Global Joint Marketing Committee shall be responsible for
drafting a global marketing plan for a Product(s) arising out of the Development
Program for cancer indications (hereinafter referred to as the "Global Marketing
Plan") *
The Global Joint Marketing Committee shall also be responsible for *
to the extent possible. The Global Joint Marketing
Committee may, if necessary, * The
Global Joint Marketing Committee may also review and discuss decisions
concerning the *
(f) Under the direction of the Global Joint Marketing Committee, Roche
shall be responsible for * for a Product arising out of the Development Program
for cancer indications *
To the extent possible, the local marketing plans
shall be consistent with the Global Marketing Plan.
(g) It is the intent of the parties that a *
arising out of
the Development Program for cancer indications wherever possible throughout the
Territory. The parties acknowledge their intention to use, if appropriate, the *
arising out of the Development Program for cancer indications
wherever possible.
(h) The parties agree, unless prohibited by law or regulation, to
exclusively Co-Promote Products arising out of the Development Program for
cancer indications in the North American Territory under a single Trademark and
based upon a marketing plan to be agreed upon by the parties. Agouron and Roche
agree to share equally (50/50) Profits and Losses earned or incurred during the
fiscal year of the Marketing Company from the sale of a Co-Promoted Product in
the North American Territory. The parties further agree, unless prohibited by
law or regulation, to discuss in good faith future rights for Agouron to
exclusively Co-Promote with Roche Products arising out of the Development
Program for cancer indications in any or all of the European Co-Promotion
Countries. The parties' future European Co-Promotion arrangement shall be based
upon and subject to the following criteria:
22
<PAGE>
(i) *
(ii) *
(iii) *
(iv) Agouron's right to Co-Promote such Product in a
selected European country shall be subject to *
(v) Agouron shall have the right to make a *
(vi) Agouron shall have the *
(vii) *
In the countries where the parties are Co-Promoting Products, the Global Joint
Marketing Committee shall assign Co-Promotional activities among the parties
based upon: *
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<PAGE>
a party not responsible for a
Co-Promotional activity may provide advisory and support services to the other
party. *
in each of the countries in the North American Territory shall be overseen
and approved by the Global Joint Marketing Committee. Notwithstanding the
preceding, the parties agree that *
for cancer
indications in each of the countries in the North American Territory *
. The parties shall provide
Furthermore, unless the parties agree otherwise, Agouron *
assigned by the Global Joint
Marketing Committee to Co-Promotional activities for such Product in a European
Co-Promotion Country *
The Global Joint
Marketing Committee may *
to advise and support Co-Promotional activities if the parties are Co-Promoting
Products. The Global Joint Marketing Committee shall establish procedures
concerning the scope and conduct of activities (including decision-making
procedures) *
(i) The Global Joint Finance Committee shall *
the parties, through the Global Joint
Marketing Committee, shall *
If a party significantly fails to fulfill
its obligation to provide its agreed upon *
in a Co-Promotional country during a fiscal year of the
Marketing Company, then the parties shall negotiate in good faith an appropriate
adjustment in the Profit Sharing percentage for such country for such fiscal
year period.
(j) The Marketing Company in each country shall be responsible for
distribution of the Product in such country.
(k) *
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<PAGE>
(l) Roche and Agouron shall each use qualified persons in the marketing
activities of Products. In accordance with procedures to be established by the
Global Joint Marketing Committee, Agouron and Roche may also engage consultants,
and other third parties, as may be necessary or desirable, to assist them in
carrying out their marketing responsibilities provided that internal resources
are not then feasibly or practically available from either of the parties which
can perform in similarly expeditious and cost-efficient manner the tasks to be
assigned to such consultants and third parties; provided however, that each
party *
(m) Roche and Agouron, through the Global Joint Marketing Committee,
shall keep the other party informed of their marketing activities, and shall
review, discuss and agree upon the conduct of additional post-Registration
clinical studies for a Product for cancer indications which are not conducted as
part of the Development Program and marketing studies for a Product for cancer
indications; the conduct of clinical studies for a Product for cancer
indications which are conducted as part of the Development Program shall be
governed by the provisions of Section 4.02. This shall include progress reports
as required by the Global Joint Marketing Committee *
and the planned activities of the succeeding period.
(n) Each party's members of the Global Joint Marketing Committee shall
report and make recommendations to their managements regarding the matters
discussed at the meetings of the Global Joint Marketing Committee.
(o) After Registration of a Product arising out of the Development
Program for cancer indications in a country, the Marketing Company of such
Product in such country shall be responsible for maintaining the Dossier for
such Product. The Marketing Company in a country shall be responsible for
responding, in a timely manner, to inquiries and for reporting adverse drug
reactions related to such Product after the Product is on the market in such
country. Notwithstanding the Marketing Company's ultimate responsibility for the
professional services and health and/or regulatory authorities communications
relating to such Product after the Product is on the market in a country, to the
extent reasonably possible, the other party shall have the right to review,
comment and participate in communications concerning such Product with the
health and/or regulatory authorities in such country. Furthermore, Agouron and
Roche shall each be entitled to respond to routine medical questions or
inquiries directed to them. Each party shall use its best efforts to provide the
other party with all information reasonably necessary to respond properly and
promptly to any such questions or inquiries; the parties shall also use their
best efforts to keep such information current. Without limiting the foregoing,
Agouron and Roche agree to notify the other party of any severe, serious,
alarming or unexpected complaints which they receive, whether or not determined
to be attributable to a Product, by telephone within twenty-four (24) hours and
in writing within three (3) business days of receipt of the complaint. All other
complaints shall be forwarded by a party to the other party within thirty (30)
calendar days of its receipt of the complaint. The parties shall confer with
respect to responding to anticipated inquiries and questions.
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<PAGE>
Section 4.04 Supply of Compound and Product.
(a) It is anticipated that timely development of the Compound and/or a
Product will require the manufacture of significant amounts of the Compound and
that successful worldwide commercialization of the Compound and/or a Product
will require annual production of large quantities of the Compound and/or a
Product. As part of the Development Program for the Compound, *
the parties also agree to continue
to use technically and commercially reasonably efforts to reduce the costs of
manufacturing the Compound and a Product throughout the period of
commercialization of the Product. The Global Joint Development Committee shall
have the authority to make decisions concerning the sourcing of clinical trial
supply of the Compound and Products arising out of the Development Program for
cancer indications. Roche and Agouron, through the Global Joint Development
Committee, agree to cooperate to identify low-cost commercial manufacturing
sources for the Compound and/or Products arising out of the Development Program
for cancer indications. To assure a continuous supply of the Compound and/or a
Product during clinical development and commercialization, Roche and Agouron may
also engage one or more third party contract manufacturers for production of the
Compound and/or a Product. *
(b) All Product is to be manufactured in accordance with the
specifications to be determined during development and later attached hereto in
Attachment 3 to this Agreement and any amendments thereto. All Product shall be
furnished with a certificate of analysis.
(c) Each party shall grant the other party a right of reference to the
drug master file for a Product in the countries where the other party, its
Affiliates or sublicensees are marketing such Product, and shall take all other
steps as may be reasonably requested by a manufacturer of such Product for the
limited purpose of enabling it to manufacture the Product for such other party.
The manufacturer shall manufacture the Product in compliance with the Dossier
for the
26
<PAGE>
Product. Each party shall promptly and fully advise the other party of any
changes, alterations or amendments to the drug master file for the Product or
any amendments, instructions or specifications required by the health or
regulatory authority, and the parties shall confer with respect to the best mode
of compliance with any such requirements.
(d) In the event any Product delivered hereunder must be recalled
because of action by the relevant health authority, the parties shall cooperate
fully with each other in conducting such recall to the full extent necessary to
ensure that the recall is effective. Prior to initial Registration of a Product
in a country, any recall expenses for such Product in such country shall be
included in the Development Costs. After initial Registration of a Product in a
country, the party marketing such Product in such country shall be responsible
for any recall expenses for such Product in such country. Any recall expenses
incurred by the party marketing a Product in a country shall be a deductible
expense when calculating Profits and Losses from the sales of such Product for
such country.
Section 4.05 Research Activities. During the *
Preclinical research activities shall include *
The Joint Research Committee may establish *
The Joint Research Committee shall establish procedures
concerning the scope and conduct of the research activities (including decision-
making procedures) assigned to such project teams. *
by the Global Joint Development Committee (or, alternatively, the Joint Research
Committee constituted pursuant to the terms of the Research Program). *
developed or acquired by or on
behalf of Agouron or Roche, independently or jointly, as the case may be, in
the conduct of the above described research activities and *
ARTICLE V - LICENSE FEES, PROFIT AND LOSS SHARING AND ROYALTIES;
DEVELOPMENT COSTS; PREMARKETING EXPENSES; GENERAL LICENSING TERMS
All of the accounting terms used in this Article V, if identified by
the use of capitalization of the first letter of each word, shall have the
meaning described in Attachment 2, which
27
<PAGE>
attachment shall also contain details of the calculation, accounting, and
sharing of Profits and Losses.
Section 5.01 License Fees, Profit and Loss Sharing and Royalties.
(a) In partial consideration for the rights granted to Roche by
Agouron, Roche hereby agrees to pay to Agouron non-refundable license issuance
fees as follows:
USD(MM)
-------
By June 28, 1996 $ 10.0
* *
* *
* *
* *
* *
* *
TOTAL $ *
(b) In partial consideration for the rights granted each of the
parties in this Agreement, the parties agree as follows:
(i) Unless the parties agree upon another sharing method,
Profits or Losses from the sales of Products arising out of the
Development Program for cancer indications in a country where the
parties are Co-Promoting Products shall be shared between the parties
in accordance with the provisions of Sections 4.03(h) and 4.03(i).
(ii) In countries where the parties are not Co-Promoting
Products, Roche shall pay Agouron *
(c) In partial consideration for the rights granted to Roche by
Agouron, Roche and Agouron hereby agrees as follows:
(i) Any *
(ii) *
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<PAGE>
(iii) As soon as possible, Agouron and Roche agree to
discuss and negotiate in good faith *
Section 5.02 Development Costs.
(a) The parties shall share Development Costs as follows:
(i) From the Effective Date, Roche shall be responsible
for payment of eighty percent (80%) of the Development Costs *
and Agouron shall be responsible
for payment of twenty percent (20%) of such Development Costs;
provided, however, that Roche shall not be responsible for
Development Costs incurred for services performed before June 19,
1996, even if such services are paid for after such date. If
Agouron has elected to Co-Promote a Product arising out of the
Development Program for cancer indications in one or more European
Co-Promotion Countries, *
(ii) Development Costs incurred for services *
In addition to its twenty percent (20%) share of worldwide
Development Costs because of its Co-Promotional activities in the North
American Territory, *
(iii) Agouron's prorata percentage share of Development
Costs for such European Co-Promotion Country *
(iv) Development Costs allocated to a European
Co-Promotion Country shall
Unless the parties agree otherwise, *
shall be deemed to have been incurred for the benefit of the *
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<PAGE>
(b) Within * days after the end of a semi-annual calendar period ending
on either June 30 or December 31 during which the parties have incurred
Development Costs, each party shall prepare and deliver to the other party a
full and true accounting of such party's actual Development Costs for such
semi-annual period. The form of the report shall be consistent with the format
presented in Schedule 1 to Attachment 1, and shall detail actual Development
Costs by major cost categories, consistent with the accounting classifications
and methods agreed upon by the parties. The accuracy of the report shall be
reviewed and signed by an appropriate financial employee of the reporting party.
The calculation of Development Costs shall not include any selling or marketing
costs and expenses.
(c) Development Costs shall be funded and reimbursed as described
in Attachment 1.
(d) Each party shall maintain books of account and complete and
accurate records of all of its Development Costs in sufficient detail to permit
the other party to confirm the correctness of such items. Each party shall
provide the other party, upon reasonable request, with copies of invoices
supporting significant third party expenditures. *
To the extent actual
Development Costs vary from reported Development Costs, adjustments shall be
made
to future invoices.
(e) Additional details relating to the definition, calculation,
reporting requirements and reimbursement procedures for Development Costs are
set forth in Attachment 1.
Section 5.03 Premarketing Expenses. If Agouron and Roche are
Co-Promoting a Product arising out of the Development Program for cancer
indications in a country, then
*
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<PAGE>
Section 5.04 General Licensing Terms.
(a) Profits and Losses for countries where the parties are
Co-Promoting a Product arising out of the Development Program for cancer
indications shall be determined on a *
Attachment 2 sets forth additional
definitions and details relating to the calculation of Profits and Losses.
(b) It is the intent of the parties that if the parties are
Co-Promoting a Product arising out of the Development Program for cancer
indications in a country, then the parties shall *
If applicable laws, regulations or
accounting rules do not permit such accounting treatment, *
(c) No sales shall be deemed to have occurred as the result of sales
between and among the parties, their Affiliates and sublicensees; it being
understood that sales occur when made to non-Affiliated third party purchasers.
A sale of a Product shall be deemed to have been made upon the earliest of
invoicing or delivery of the Product for value to a non-Affiliated third party
purchaser. In the case of a sale or other disposal of a Product for value other
than in an arm's length transaction exclusively for money, such as barter or
counter trade, sales shall be calculated using the fair market value of the
Product (if higher than the stated sales price) in the country of disposal.
(d) *
(e) *
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(f) In calculating Profits and Losses with respect to a Combination
Product in a country, the parties shall enter into good faith negotiations
regarding the percentage of the Adjusted Gross Sales of such Combination Product
to be used in calculating Profits and Losses with respect to such Combination
Product in such country. If the parties are unable to agree upon such
percentage, the percentage of the Adjusted Gross Sales of such Combination
Product to be used in calculating Profits and Losses with respect to such
Combination Product in a country shall be equal *
If the numerator and denominator
cannot be determined in the manner set forth above, then the numerator *
In each case, the
cost is to be determined in accordance with the party's standard accounting
procedures.
(g) In calculating royalties with respect to a Combination Product, the
parties shall enter into good faith negotiations regarding the percentage of the
Net Sales of such Combination Product to be used in calculating royalties
payable with respect to such Combination Product on a country-by-country basis.
If the parties are unable to agree upon such percentage, royalties with respect
to a Combination Product in a country shall be *
If the numerator
and denominator cannot be determined in the manner set forth above, then the
numerator shall be the *
In each case,
the cost is to be determined in accordance with the party's standard
accounting procedures.
(h) Division of Profits and Losses from the sales of a Product arising
out of the Development Program for cancer indications shall be * from the date
of the Initial Commercial Sale or license to a third party, its Affiliates, or
sublicensees of such Product in such country (or, if the
parties are Co-Promoting a Product in a country, the date on which premarketing
expenses are first incurred), *
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(i) Royalties due on the sale of a Product shall be payable on a
country-by-country basis from the date of Initial Commercial Sale by a party,
its Affiliates or sublicensees of such Product in such country, *
Notwithstanding the preceding where a country is included in the European Union,
an extension in the period during which the payment of royalties is due on the
sale of a Product resulting from the application of the provisions of (iii)
above shall not be applicable if prohibited by law. The obligation to pay
royalties shall be imposed only once with respect to each unit of Product sold.
(j) The parties agree that the accounting and payment of Profits and
Losses and reimbursement of Allowable Expenses from the Co-Promotion of a
Product arising out of the Development Program for cancer indications in a
country shall comply with the following terms and conditions:
(i) As soon as possible, but no later than *
the Marketing Company in such
country shall provide the non-Marketing Company with its good faith
estimate of the amount of Adjusted Gross Sales and Sublicense
Revenues in such country for such Co-Promoted Product for such
calendar month, and the non-Marketing Company shall submit to the
Marketing Company its good faith estimate of its Sublicense
Revenues in such country for such Co-Promoted Product for such
calendar month.
(ii) * after the end of a calendar quarter in which the
parties have Co-Promoted a Product arising out of the Development
Program for cancer indications in a country, the Marketing Company
shall pay the non-Marketing Company its share of *
generated by the Co-Promotion of such Product in such country for such
calendar quarter, or submit to the non-Marketing Company an invoice for
its share of any * in such country for such calendar quarter; the
non-Marketing Company shall pay such invoice within * The * for a
calendar quarter shall be based on the *
for the
applicable calendar quarter and the budget of Allowable Expenses for
such country for the applicable calendar quarter (agreed to by the
parties pursuant to the provisions of Section 4.03(i)), *
A party's share of
for a country in a calendar quarter shall be determined pursuant
to the provisions of Section 5.01(b)(i).
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(iii) Within * after the end of a calendar quarter in which
the parties have Co-Promoted a Product arising out of the Development
Program for cancer indications in a country, the Marketing Company
shall *
incurred in such country during such calendar quarter. A party's *
shall be based on the *
(agreed to by the parties pursuant to the terms of Section 4.03(i)),
as such budget is revised and updated. If the parties have *
the Marketing Company may
If the Marketing Company utilizes *
(iv) * after the end of a semi-annual calendar period ending
on either June 30 or December 31 during which the parties have
Co-Promoted a Product arising out of the Development Program for cancer
indications, each party shall furnish and deliver to the other party a
full and true accounting of its actual Adjusted Gross Sales, Sublicense
Revenues and Allowable Expenses for such Product for such semi-annual
period for each country in which the parties have Co-Promoted such
Product. The reporting party's Adjusted Gross Sales, Sublicense
Revenues and Allowable Expenses for such semi-annual period shall be
reviewed and signed by an appropriate financial employee of the
reporting party.
(v) The net amount of any payment adjustments due between
the parties because of differences *
The net
amount of any payment adjustments due between the parties
because of differences in *
(vi) If a party in good faith disputes the correctness of a
portion of the other party's accounting, the party shall only be
obligated to reimburse the undisputed portion of *
and shall be
obligated to reimburse or pay the balance, if any, upon resolution
of the disputed issues. The parties agree to use their best faith
efforts to resolve any disputes concerning the correctness of
Allowable Expenses and the calculation of Profit and Losses as soon as
possible.
(vii) Any payments due pursuant to the terms of this Section
5.04(j) that are not paid on or before the date such payments are due
shall bear interest at the lower of: (A) the average one (1) month
London Interbank Offered Rates, as reported by Datastream from time to
time, plus one hundred (100) basis points; or (B) the highest
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interest rate permitted by applicable law, calculated on the number
of days in each month that such payment is delinquent.
(k) The parties agree that the accounting and payment of royalties
shall comply with the following terms and conditions:
(i) As soon as possible, but no later than *
after the end of a calendar month, a party owing a royalty shall
provide the other party with *
(ii) On or before the last business day in *
of each and every calendar year for as long as royalties are
due following the commencement of the marketing of Products, the party
owing the royalty shall pay to the other party a sum equal to the
aggregate of the royalty due on such party's *
(iii) * after the end of a semi-annual calendar period ending
on either June 30 or December 31 during which there was a Net Sale of a
Product upon which a royalty was due, the party owing the royalty shall
furnish and deliver to the other party a full and true accounting of
the actual Net Sales of such Product for such semi-annual period for
each country for which such royalty is due. The reporting party's
accounting of royalty for such semi-annual period shall be reviewed and
signed by an appropriate financial employee of the reporting party, and
shall identify all relevant details regarding *
(iv) The net amount of any payment adjustments due between
the parties because of differences in *
The net amount of any payment adjustments due between the parties
because of differences in *
(v) Any royalty payments due that are not paid on or before
the date such payments are due shall bear interest at the lower of: (A)
the average one (1) month London Interbank Offered Rates, as reported
by Datastream from time to time, plus one hundred (100) basis points;
or (B) the highest interest rate permitted by applicable law,
calculated on the number of days in each month that such payment is
delinquent.
(l) Each party shall maintain and cause its Affiliates and sublicensees
to maintain books of account and complete and accurate records pertaining to the
sale or other disposition of Products, Allowable Expenses and of the royalty and
other amounts payable under this Agreement in sufficient detail to permit the
other party to confirm the correctness of such items. *
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(m) A party owing a royalty or other payment to the other party shall
be entitled to withhold from such payment the amount, if any, of any withholding
tax assessable to the party due the payment, provided evidence of payment of any
such tax is promptly provided to such party. If any taxes (other than
value-added taxes) are imposed on payments of royalties or profits to Agouron or
Roche and are required to be withheld therefrom, such taxes shall be for the
account of Agouron or Roche, respectively, and the payments shall be reduced
accordingly. Roche and Agouron shall each advise the other and provide it with
copies of the tax receipts for all taxes deducted from the payment of royalties
or profits.
(n) The costs of defending or settling any claim or suit by any third
party for infringement of a patent of such third party by a party's practice of
the Patent Rights, Agouron Technology, Roche Technology, and/or Development
Program Technology in discovering, developing, manufacturing or commercializing
the Compound, intermediates thereof and/or Products shall be *
(o) Upon expiration of the foregoing Profits and Losses sharing or
royalty obligations in a country, which shall also be the expiration date of the
licenses granted in such country
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pursuant to Sections 2.01(a), 2.01(b), 2.01(c) or 2.03, each party *
(p) The parties agree in the future to use their reasonable efforts to
negotiate any additional licensing terms for the Compound, intermediates thereof
and/or Products arising out of the Development Program for cancer indications
which may be necessary to clarify the rights and obligations of the parties.
Section 5.05 Foreign Currency.
(a) Development Costs, Patent and Trademark Costs, Profits and Losses,
Adjusted Gross Sales, Net Sales, Sublicense Revenues, Allowable Expenses, and
any royalty amounts shall be stated in United States dollars. Payments of
Development Costs, Patent and Trademark Costs, Profits and Losses, Allowable
Expenses and royalties shall be made in United States dollars. Any required
conversion of Development Costs, Patent and Trademark Costs, Profits and Losses,
Adjusted Gross Sales, Net Sales, Sublicense Revenues, Allowable Expenses, and
any royalty amounts to United States dollars shall be done using the monthly
average rate of exchange for the calendar month in which such Development Costs,
Patent and Trademark Costs, Profits and Losses, Adjusted Gross Sales, Net Sales,
Sublicense Revenues, Allowable Expenses, and any royalty amounts were incurred
or first determined.
(b) The conversion from a foreign currency to United States
dollars shall be made by *
(c) *
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(d) If London Interbank Offered Rates are no longer available due to
the implementation of the European Economic and Monetary Union, any reference to
the London Interbank Offered Rates in this Agreement shall be replaced by a
comparable reference interest rate for the single currency "EURO" determined at
the financial center where the reference is made. If no such reference interest
rate can be determined at such financial center, the parties shall agree upon a
new reference interest rate to be used as appropriate in this Agreement in lieu
of the unavailable London Interbank Offered Rates.
ARTICLE VI - TERM AND TERMINATION
Section 6.01 Termination for Breach. Either party may, at its option,
terminate this Agreement for cause in the event the other party shall commit a
material breach of this Agreement (including the failure of a party to pay its
undisputed share of Development Costs) and shall fail to cure such breach during
the one hundred twenty (120) day period (thirty (30) day period in the case of
any payment default) following receipt of a written notice of such breach from
the non-breaching party. After the end of the applicable cure period, the party
who has the right of termination may exercise its termination option by giving
the breaching party prior written notice of at least fifteen (15) days of its
election to terminate. Any termination of this Agreement shall not release the
breaching party from any obligations incurred hereunder, and the non-breaching
party shall be entitled to pursue an action for damages arising as a result of
such material breach.
Section 6.02 *
(a) *
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(b) *
(c) *
Section 6.03 Termination by Mutual Agreement. The parties may
at any time terminate this Agreement, in part or in its entirety, by mutual
written agreement.
Section 6.04 Termination Upon Bankruptcy. In the event that a party is
subject to any proceeding under the bankruptcy laws, or to the appointment of a
receiver, trustee or liquidator of its business or substantially all of its
assets, and such proceeding, if involuntary, is not dismissed or discharged
within one hundred fifty (150) days after such proceeding is instituted, or upon
the liquidation, dissolution, or winding up of its business, then this
Agreement, at the election of the other party, shall be terminated in its
entirety for cause upon a notice in writing of at least fifteen (15) days from
the party who is not bankrupt or insolvent.
Section 6.05 Disposition of Inventory. In the event of the cancellation
or termination of any license rights with respect to a Product, inventory of
such Product may be sold for up to six (6) months after date of cancellation or
termination, provided required payments, if any, are paid thereon.
Section 6.06 Effect of Termination. The termination of this Agreement
shall, to the extent not otherwise expressly provided herein, not affect the
rights and obligations of the parties under this Agreement with respect to: (i)
the parties' obligations of confidentiality, indemnification and compensation
for services performed; (ii) a party's liability for failure to fulfill its
obligations or undertakings under this Agreement; and (iii) the rights or
obligations of the parties otherwise expressly stated in the Agreement to
survive the termination of this Agreement. If this Agreement is terminated,
Agouron's obligations under Sections 2.02(b) and 4.02(o) shall terminate. Any
other provisions of this Agreement which by their nature are
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intended to survive termination shall also survive. Upon any termination of this
Agreement in its entirety because of a breach of the other party, neither party
waives any rights to any remedies it may have arising out of the termination. In
the event of any breach by a party with respect to obligations which continue
after a termination in its entirety of this Agreement, the non-breaching party
shall have all remedies available to it, as if the Agreement were still in
effect on the date of such breach.
ARTICLE VII - WARRANTIES AND COVENANTS; INDEMNITIES;
INSURANCE; DISPUTE RESOLUTION; GOVERNMENTAL APPROVALS; EXPORT CONTROLS
Section 7.01 Warranties and Covenants.
(a) Each party represents and warrants to the other party that it has
the legal power, authority and right to enter into this Agreement and to perform
all of its respective obligations set forth herein, including the attachments
hereto.
(b) Agouron represents and warrants that, to the best of its knowledge,
it has disclosed to Roche the material results of preclinical and human clinical
testing of the Compound completed prior the Effective Date.
(c) Agouron represents and warrants that, as of the date this Agreement
is executed, other than the patent applications and/or patents listed in
Schedule 3, it was not aware of the existence of any patents owned and
Controlled by a third party covering the Compound which would materially prevent
the parties from commercializing the Compound.
(d) Each party covenants that it shall not commit any act or fail to
take any action which, in any significant way, would be in conflict with its
material obligations under this Agreement and the attachments hereto.
(e) Each party promises to comply in all material respects with the
terms of the licenses granted to it under this Agreement, and with all federal,
state, local and foreign laws, rules and regulations applicable to the
development, manufacture, distribution, import and export, and sale of
pharmaceutical products pursuant to this Agreement.
(f) EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, EACH OF
THE PARTIES MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OF ANY SUBJECT MATTER INCLUDED WITHIN THE
CLAIMS OF THE PATENT RIGHTS, INCLUDING THE COMPOUND. THE PARTIES UNDERSTAND AND
AGREE THAT DEVELOPMENT AND COMMERCIALIZATION OF THE COMPOUND AND/OR PRODUCTS
WILL INVOLVE APPROVAL BY REGULATORY AUTHORITIES, AND THAT NO PARTY IS
GUARANTEEING THE SAFETY OR EFFICACY OF THE COMPOUND AND/OR PRODUCTS, OR THAT THE
COMPOUND AND/OR PRODUCTS WILL RECEIVE THE REQUIRED APPROVALS.
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Section 7.02 Indemnities; Insurance.
(a) Roche shall indemnify and hold harmless Agouron and its Affiliates,
employees, and agents (an "Agouron Indemnified Party") from and against any and
all liabilities, losses, damages, costs, or expenses (including reasonable
investigative and attorneys' fees) which the Agouron Indemnified Party may
incur, suffer or be required to pay resulting from or arising in connection with
any product liability or other claims, other than claims for patent
infringement, arising from the use by any person of any Product, to the extent
such product liability or other claim results from the negligent, reckless or
intentional misconduct of Roche, its Affiliates or sublicensees, or their
respective employees and agents, or on account of Roche's failure to fulfill its
obligations or undertakings under this Agreement; provided, however, that in no
event shall Roche be liable to an Agouron Indemnified Party for any indirect,
incidental, special or consequential damages, including loss of revenues or
profits from sales of Products.
(b) Agouron shall indemnify and hold harmless Roche and its Affiliates,
employees, and agents (a "Roche Indemnified Party") from and against any and all
liabilities, losses, damages, costs, or expenses (including reasonable
investigative and attorneys' fees) which the Roche Indemnified Party may incur,
suffer or be required to pay, resulting from or arising in connection with any
product liability or other claims, other than claims for patent infringement,
arising from the use by any person of any Product, to the extent such product
liability or other claim results from the negligent, reckless or intentional
misconduct of Agouron, its Affiliates or sublicensees, or their respective
employees and agents, or on account of Agouron's failure to fulfill its
obligations or undertakings under this Agreement; provided, however, that in no
event shall Agouron be liable to a Roche Indemnified Party for any indirect,
incidental, special or consequential damages, including loss of revenues or
profits from sales of Products.
(c) To the extent that a product liability or other claim, other than a
claim for patent infringement, results from the negligent, reckless or
intentional misconduct of both of the parties, their Affiliates, sublicensees,
or their respective employees and agents, the parties agree to share in an
equitable manner such liabilities, losses, damages, costs, or expenses in
proportion to the relative fault of each of the parties, their Affiliates,
sublicensees, or their respective employees and agents.
(d) Unless the parties agree otherwise, all other liabilities, losses,
damages, costs, or expenses (including reasonable investigative and attorneys'
fees) under this Section 7.02 relating to or involving a Product in a country,
except as provided by the terms of Sections 7.02(a), (b) and (c), shall be the
responsibility of the party marketing such Product in such country. The party
marketing a Product in a country shall indemnify the non-marketing party in such
country from and against any and all liabilities, losses, damages, costs, or
expenses (including reasonable investigative and attorneys' fees) which such
non-marketing party may incur, suffer or be required to pay resulting from or
arising in connection with any product liability or other claims, other than
claims for patent infringement, arising from the use by any person of such
Product in such country. Section 3.02 sets forth the parties' liability
obligations arising from claims for patent infringement. Any payments made by
the party marketing a Product in a country pursuant to the terms of this Section
7.02(d) shall be a deductible expense when calculating Profits and Losses from
the sales of such Product for such country.
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(e) The aforesaid obligations of the indemnifying party shall be
subject to the indemnified party fulfilling the following obligations:
(i) The indemnified party shall fully cooperate with the
indemnifying party in the defense of any claims, actions, etc., which
defense shall be controlled by the indemnifying party.
(ii) The indemnified party shall not, except at its own cost,
voluntarily make any payment or incur any expense with respect to any
claim or suit without the prior written consent of the indemnifying
party, which consent such party shall not be required to give.
(iii) Promptly after receipt by the indemnified party of
notice of the commencement of any litigation or threat thereof which
may reasonably lead to a claim for indemnification, such party shall
notify the indemnifying party.
(f) The parties agree to maintain appropriate amounts of product
liability insurance coverage.
Section 7.03 Dispute Resolution. In the event of any controversy or
claim arising out of or relating to any provision of this Agreement, the parties
shall try to settle their differences amicably between themselves. Any
unresolved disputes arising between the parties relating to, arising out of, or
in any way connected with this Agreement or any term or condition hereof, or the
performance by either party of its obligations hereunder, whether before or
after termination of this Agreement, except as otherwise provided in this
Agreement, shall be finally resolved by binding arbitration. Whenever a party
shall decide to institute arbitration proceedings, it shall give written notice
to that effect to the other party. The party giving such notice shall refrain
from instituting the arbitration proceedings for a period of sixty (60) days
following such notice. If Roche is the party initiating the arbitration, the
arbitration shall be held in San Diego, California, according to the rules of
the American Arbitration Association ("AAA"). If Agouron is the party initiating
the arbitration, the arbitration shall be held in Newark, New Jersey, according
to the rules of the AAA. The arbitration shall be conducted by a single
arbitrator mutually chosen by the parties. If the parties can not agree upon a
single arbitrator within fifteen (15) days after the institution of the
arbitration proceeding, then the arbitration shall be conducted by a panel of
three arbitrators appointed in accordance with AAA rules; provided, however,
that each party shall, within thirty (30) days after the institution of the
arbitration proceedings, appoint one arbitrator with the third arbitrator being
chosen by the other two arbitrators. If only one party appoints an arbitrator,
then such arbitrator shall be entitled to act as the sole arbitrator to resolve
the controversy. Any arbitration hereunder shall be conducted in the English
language, to the maximum extent possible. All arbitrator(s) eligible to conduct
the arbitration must agree to render their opinion(s) within thirty (30) days of
the final arbitration hearing. The arbitrator(s) shall have the authority to
grant injunctive relief and specific performance and to allocate between the
parties the costs of arbitration in such equitable manner as he determines;
provided, however, that each party shall bear its own costs and attorneys' and
witness' fees. Notwithstanding the terms of this Section 7.03, a party shall
also have the right to obtain, prior to the arbitrator(s) rendering the
arbitration decision, provisional remedies, including injunctive relief or
specific performance, from a court having jurisdiction thereof. The
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arbitrator(s) shall, upon the request of either party, issue a written opinion
of the findings of fact and conclusions of law and shall deliver a copy to each
of the parties. Decisions of the arbitrator(s) shall be final and binding on all
of the parties. Judgment on the award so rendered may be entered in any court
having jurisdiction thereof.
Section 7.04 Governmental Approvals. Roche and Agouron shall obtain any
government approval(s) required to enable this Agreement to become effective, or
to enable any payment hereunder to be made, or any other obligation hereunder to
be observed or performed. Each party shall keep the other informed of its
progress in obtaining any such government approval and shall cooperate with the
other party in any such efforts.
Section 7.05 Export Controls. The parties agree to comply with the
United States laws and regulations governing exports and re-exports of the
Compound, intermediates thereof, Products, Development Program Technology,
Agouron Technology, Roche Technology, or any other technology or software
developed or disclosed as a result of this Agreement. The parties acknowledge
that any performance under this Agreement is subject to any restrictions which
may be imposed by the United States laws and regulations governing exports and
re-exports. Each party agrees to provide the other party with any reasonable
assistance, including written assurances which may be required by a competent
governmental authority and by applicable laws and regulations as a precondition
for any disclosure of technology or software by the other party under the terms
of this Agreement. The obligations of this Section 7.05 shall survive
termination or expiration of this Agreement.
ARTICLE VIII - DISCLOSURE OF AGREEMENT
Section 8.01 Disclosure of Agreement. Except as agreed to by the
parties, neither Agouron nor Roche shall release any information to any third
party with respect to any of the terms of this Agreement without the prior
written consent of the other, which consent will not unreasonably be withheld.
This prohibition includes, but is not limited to, press releases, educational
and scientific conferences, promotional materials and discussions with the
media. If a party determines that it is required by law to release information
to any third party regarding the terms of this Agreement, it shall notify the
other party of this fact prior to releasing the information. The notice to the
other party shall include the text of the information proposed for release. The
other party shall have the right to confer with the notifying party regarding
the necessity for the disclosure and the text of the information proposed for
release. Notwithstanding the preceding, Roche and Agouron shall each have the
right to disclose the terms of this Agreement to persons it proposes to enter
into business relationships with, if such persons are subject to confidentiality
and use obligations equivalent to those applicable to the disclosing party
hereunder.
ARTICLE IX - GENERAL PROVISIONS
Section 9.01 No Implied Licenses. Only the licenses granted pursuant to
the express terms of this Agreement shall be of any legal force and effect. No
license rights shall be created by implication or estoppel.
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Section 9.02 No Waiver. Any failure by a party to enforce any right
which it may have hereunder in any instance shall not be deemed to waive any
right which it or the other party may have in any other instance with respect to
any provision of this Agreement, including the provision which such party has
failed to enforce.
Section 9.03 Severability; Government Acts. In the event that any
provision of this Agreement is judicially determined to be unenforceable, in
part or in whole, with regard to any or all of the countries in the Territory,
the remaining provisions or portions of this Agreement shall be valid and
binding to the fullest extent possible, and the parties shall endeavor to
negotiate additional terms, as feasible, in a timely manner so as to fully
effectuate the original intent of the parties to the extent possible in the
applicable countries. In the event that any act, regulation, directive, or law
of a country, including its departments, agencies or courts, should make
impossible or prohibit, restrain, modify or limit any material act or obligation
of a party under this Agreement and, if any party to this Agreement is
materially adversely affected thereby, the parties shall attempt in good faith
to negotiate a lawful and enforceable modification to this Agreement which
substantially eliminates the material adverse effect; provided, that, failing
any agreement in that regard, the party who is materially adversely affected
shall have the right, at its option, to suspend or terminate this Agreement as
to such country.
Section 9.04 Ambiguities. Ambiguities, if any, in this Agreement shall
not be construed against any party, irrespective of which party may be deemed to
have authored the ambiguous provision.
Section 9.05 Notification of Authorities. After execution of this
Agreement, to the extent required by law, Agouron, after consultation with
Roche, shall notify the appropriate United States authorities about the terms of
this Agreement and Roche, after consultation with Agouron, shall notify the
appropriate European and other authorities about the terms of this Agreement.
The parties shall keep each other fully advised of the status and progress of
the notification procedures.
Section 9.06 No Agency. Agouron and Roche shall have the status of
independent contractors under this Agreement and nothing in this Agreement shall
be construed as an authorization of either party to act as an agent of the
other.
Section 9.07 Captions; Number; Official Language. The captions of the
Articles and Sections of this Agreement are for general information and
reference only, and this Agreement shall not be construed by reference to such
captions. Where applicable in this Agreement, the singular includes the plural
and vice versa. To the extent appropriate, the meaning of terms whose first
letters are capitalized, but which are variations of terms that are defined
elsewhere in this Agreement, shall each have the same meaning as the defined
term (e.g., "Co-Promoting" and "Co-Promotional" shall have the same meaning as
the defined term "Co-Promote," to the extent appropriate). English shall be the
official language of this Agreement and any license agreement provided for
hereunder, and all communications between the parties hereto shall be conducted
in that language.
Section 9.08 Force Majeure. Neither party shall be responsible to the
other party for any failure, delay or interruption in the performance of any of
its obligations under this
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Agreement if such failure, delay or interruption is caused by any act of God,
earthquake, fire, casualty, flood, war, epidemic, riot, insurrection, or any
act, exercise, assertion or requirement of a governmental authority, or other
cause beyond the reasonable control of the party affected if the party affected
shall have used its best efforts to avoid such occurrence. If either party
believes that the performance of any of its obligations under this Agreement
will be delayed or interrupted as a result of any of the reasons stated in this
Section 9.08 and provided such party is able to do so, such party shall promptly
notify the other party of such delay or interruption and the cause therefor, and
shall provide such other party with its estimate of when the performance of its
obligations will recommence. When the party affected is able to recommence the
performance of obligations delayed or interrupted as a result of any of the
reasons stated in this Section 9.08, it shall so notify the other party and,
except as otherwise provided in this Agreement, it shall promptly resume the
performance of such obligations.
Section 9.09 Amendment. This Agreement, including the Attachments,
Exhibits, Schedules and Appendices, constitutes the full agreement of the
parties with respect to the subject matter of this Agreement, and incorporates
any prior discussions between them with respect to such subject matter. In the
event of any inconsistency between this Agreement and the LOI, including Exhibit
A thereto, the terms of this Agreement shall govern the development and
commercialization of Products. This Agreement, including the attachments hereto,
shall not be amended, supplemented or otherwise modified, except by an
instrument in writing signed by duly authorized officers of the parties.
Section 9.10 Applicable Law. This Agreement shall be construed and the
rights of the parties shall be determined in accordance with the laws of the
United States and the State of California, without regard to its conflict of law
provisions.
Section 9.11 Notices. Any notice required or permitted to be given
under this Agreement shall be in writing and shall be given in person, delivered
by recognized overnight delivery service, sent by mail (certified or registered
or air mail for addresses outside of the continental U.S.), or by telefax (or
other similar means of electronic communication), whose receipt is confirmed by
confirming telefax, and addressed, in the case of Agouron, to the Vice
President, Commercial Affairs (with a copy to the Legal Department) and, in the
case of Roche, to the Head of the Pharma Division (with a copy to the Legal
Department), at the addresses shown at the beginning of this Agreement, or such
other person and/or address as may have been furnished in writing to the
notifying party in accordance with the provisions of this Section 9.11. Except
as otherwise provided herein, any notice shall be deemed delivered upon the
earlier of: (i) actual receipt; (ii) two (2) business days after delivery to
such recognized overnight delivery service; (iii) five (5) business days after
deposit in the mail; or (iv) the date of receipt of the confirming telefax.
Section 9.12 Assignment. This Agreement shall not be assignable by
either party, except to an Affiliate, without the prior written consent of the
other party, which consent may be withheld at the sole discretion of the other
party. Any such assignment without the prior written consent of the other party
shall be void. If this Agreement is assigned to an Affiliate, the assigning
party shall still be responsible for all of the obligations specified in this
Agreement with respect to the assigning party. Notwithstanding the preceding, in
the event of: (i) a sale or transfer of all or substantially all of assignor's
assets; or (ii) the merger or consolidation of
45
<PAGE>
assignor with another company, this Agreement shall be assignable to the
transferee or successor company.
Section 9.13 Succession. This Agreement shall be binding upon all
successors in interest, assigns, trustees and other legal representatives of
the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in
triplicate originals, by their respective officers thereunto duly authorized, as
of the day and year hereinabove written.
F. HOFFMANN-LA ROCHE LTD AGOURON PHARMACEUTICALS, INC.
By: /s/ W. Henrich By: /s/ Gary Friedman, Esq.
Name: W. Henrich Name: Gary Friedman, Esq.
Title: Senior Vice President Title: V. P. & General Counsel
By: /s/ J.T. Arnold By: /s/ R. Kent Snyder
Name: J.T. Arnold Name: R. Kent Snyder
Title: Authorized Signatory Title: V.P., Commercial Affairs
HOFFMANN-LA ROCHE INC.
By: /s/ Stephen G. Sudouan
Name: Stephen G. Sudouan
Title: Sr. V.P., Pharmaceuticals
By: /s/ William H. Epstein
Name: William H. Epstein
Title: Assistant Secretary
46
<PAGE>
SCHEDULE 1
AGOURON PATENT RIGHTS
*
S1-1
<PAGE>
SCHEDULE 2
AGOURON PATENT RIGHTS COMPOUNDS
The following is a partial list of chemical compounds included within Agouron
Patent Rights:
AGOURON COMPOUND NUMBERS*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
* Parenthetical numbers reference patent application numbers covering the
compound.
S2-1
<PAGE>
SCHEDULE 3
SECTION 7.01(c) EXCLUSION LIST
*
1. *
2. *
3. *
S3-1
<PAGE>
EXHIBIT 1
INITIAL DEVELOPMENT PLAN FOR DEVELOPMENT PROGRAM
*
*
*
*
*
*
*
*
E1-1
<PAGE>
SCHEDULE ONE TO EXHIBIT 1
AG3340 STRATEGIC DEVELOPMENT PLAN
*
E1-S1-1
<PAGE>
EXHIBIT 2
INITIAL DEVELOPMENT BUDGET FOR DEVELOPMENT PROGRAM
*
E2-1
<PAGE>
EXHIBIT 2
INITIAL DEVELOPMENT BUDGET FOR DEVELOPMENT PROGRAM
*
E2-2
<PAGE>
ATTACHMENT 1
DEVELOPMENT COSTS AND REIMBURSEMENT PROCEDURES
The purpose of this Attachment is to define Development Costs, and to describe
and define a methodology to fund and reimburse such Development Costs.
DEVELOPMENT COSTS
Development Costs means the costs of *
specifically incurred to further the Development Program. The calculation of
Development Costs shall take into consideration the following:
1. The cost of development personnel charging the Development Program
shall be calculated using a *
Aggregate *
shall be calculated by applying an agreed to *
shall include the *
Such costs would include, but not be
limited to, the following:
*
does not include any of the direct charges included in Paragraph 2
below. * charging
the Development Program shall generally include staff from the
following disciplines: *
Both parties shall utilize the same * on a *
The initial *
for the *
This * shall be *
Such adjusted rate may be compared to Agouron's anticipated *
To the extent there are any significant differences, the parties
shall discuss the need for any revisions to such rate.
2. Third party costs shall consist of specifically identifiable
contract services or materials which are necessary to supplement
the development capabilities of either Roche or Agouron, or
otherwise required in the Development Program. Such costs shall
include, but not be limited to, the following costs and services: *
A1-1
<PAGE>
All such third
party costs shall be charged to the Development Program when
incurred. Patent and Trademark costs shall not be included in
Development Costs and shall be identified and billed separately.
REIMBURSEMENT
Estimated Development Costs shall be *......
and comply with the following terms and conditions:
1. * Agouron shall invoice
Roche for 80% of its estimated Development Costs for such quarter,
and Roche shall invoice Agouron for 20% of its estimated Development
Costs for such quarter. Such estimated Development Costs *
as such development budget is revised and updated
pursuant to the provisions of Section 4.02(f). A party's share of
Development Costs in a *
2. *
during which the parties have incurred Development Costs, each
party shall furnish and deliver to the other party a full and true
accounting of its Development Costs for such semi-annual period. The
reporting party's Development Costs for such semi-annual period shall
be reviewed and signed by an appropriate financial employee of the
reporting party.
3. *
4. If a party in good faith disputes the correctness of a portion of the
other party's accounting, the party *
The parties
agree to use their best faith efforts to resolve any disputes
concerning the correctness of Development Costs as soon as possible.
A1-2
<PAGE>
5. Any payments due pursuant to the terms of Section 5.02 that are not
paid on or before the date such payments are due shall bear interest at
the lower of: (i) the average one month London Interbank Offered Rates,
as reported by Datastream from time to time, plus 100 basis points; or
(ii) the highest interest rate permitted by applicable law, calculated
on the number of days in each month that such payment is delinquent.
6. Development Costs invoices shall be stated in United States dollars.
Payment of Development Costs shall be made in United States dollars.
Any Development Costs which are incurred outside of the United States
shall be converted to United States dollars using the procedures
described in Section 5.05.
A1-3
<PAGE>
SCHEDULE 1 TO ATTACHMENT 1
AGOURON / ROCHE
DEVELOPMENT PROGRAM EXPENDITURES
*
<TABLE>
<CAPTION>
INTERNAL STAFF COSTS:
Current Period Cumulative
<S> <C> <C>
* $ x.xx $ y.yy
* x.xx y.yy
* x.xx y.yy
* x.xx y.yy
* x.xx y.yy
* x.xx y.yy
* x.xx y.yy
* x.xx y.yy
* x.xx y.yy
* x.xx y.yy
----- -----
* xxx.xx yyy.yy
* x.xx
* $ xxx.xx $ yyy.yy
-------- --------
OUTSIDE SERVICES:
Current Period Cumulative
* $ x.xx $ y.yy
* x.xx y.yy
* x.xx y.yy
* x.xx y.yy
* x.xx y.yy
* x.xx y.yy
* x.xx y.yy
----- -----
Total Outside Services $ xxx.xx $ yyy.yy
-------- --------
TOTAL DEVELOPMENT COSTS $ x,xxx.xx $ y,yyy.yy
========== ==========
<FN>
NOTE: To the extent practicable, actual costs shall be presented in the same detail as that shown in the summary Development
Program budget in Exhibit 2.
</FN>
</TABLE>
A1-S1-1
<PAGE>
SCHEDULE 2 TO ATTACHMENT 1
AGOURON DEVELOPMENT COST INVOICE
MONTH 1X, 199X
<TABLE>
<CAPTION>
* * Total
<S> <C> <C>
1. * $ $
=========== =========
2. *
$ $
* * * Total
3. * $ $ $
=========== ========== =========
4. * $ $ $
=========== ========== =========
5. * $ $ $
=========== ========== =========
6. *
* $ $ $
=========== ========== =========
* $ $ $
=========== ========== =========
- -----------
1 *
2 *
</TABLE>
A1-S2-1
<PAGE>
SCHEDULE 2 TO ATTACHMENT 1
AGOURON DEVELOPMENT COST INVOICE
*
<TABLE>
<CAPTION>
* * Total
<S> <C> <C>
1. * $ $
=========== =========
2. *
$ $
* * * Total
3. * $ $ $
=========== ========== =========
4. * $ $ $
=========== ========== =========
5. * $ $ $
=========== ========== =========
6. *
* $ $ $
=========== ========== =========
* $ $ $
=========== ========== =========
- -----------
1 *
2 *
</TABLE>
A1-S2-2
<PAGE>
ATTACHMENT 2
ACCOUNTING TERMS/DEFINITIONS
All of the accounting terms used in this Attachment 2, if identified by the use
of capitalization of the first letter of each word, shall have the same meanings
described in the Definitions Section below.
ACCOUNTING TERMS AND PROFIT SHARING METHODOLOGY
Profits and Losses earned or incurred during the fiscal year of the Marketing
Company from the sales of Products arising out of the Development Program for
cancer indications in countries located in the North American Territory and/or
the European Co-Promotion Countries shall be shared by the parties if the
parties are Co-Promoting Products in such countries. The purpose of this
Attachment 2 is to describe and define the methodologies used to achieve such
sharing of Profits and Losses.
The Marketing Company shall be responsible for the *
Profits and Losses resulting from North American Territory sales and from sales
in the European Co-Promotion Countries shall be calculated in United States
dollars. Payment of Profits generated by the Co-Promotion of a Product,
Allowable Expenses and remittance of Losses shall be made in United States
dollars. The conversion of non-United States dollar currencies to United States
dollars shall be made in accordance with the procedures set forth in Section
5.05.
The Global Joint Finance Committee (or a local project team established by the
Global Joint Finance Committee) shall, for each Co-Promotion Country, *
Allowable Expenses will be charged to the Product *
A2-1
<PAGE>
DEFINITIONS
1. "Adjusted Gross Sales" shall have the meaning set forth in Section
1.22.
2. "Allowable Expenses" shall include the following internal and external
expenses incurred in the commercialization of Products: *
3. "Cost of Goods Sold" shall mean the *
4. "Distribution Expenses," with the exception of *
A2-2
<PAGE>
5. "General and Administrative Expenses," *
6. "Marketing, Advertising and Education Expenses" shall mean the *
(a) *
A2-3
<PAGE>
(b) *
(c) *
7. "Premarketing Expenses" shall mean those *
8. "Profits and Losses" *
(a) *
(b) *
9. "Selling and Promotion Expenses" shall mean the *
A2-4
<PAGE>
(a) *
(b) *
10. *
A2-5
<PAGE>
ATTACHMENT 3
PRODUCT MANUFACTURING SPECIFICATIONS
THE TERMS OF THE PRODUCT MANUFACTURING SPECIFICATIONS WILL BE AGREED
UPON BY THE PARTIES PRIOR TO COMMERCIALIZATION
A3-1
<PAGE>
ATTACHMENT 4
TRADEMARK LICENSE AGREEMENT
This Trademark License, effective as of June 19, 1996, is between Agouron
Pharmaceuticals, Inc., a corporation duly organized and existing under the laws
of the state of California, having a principal place of business at 10350 North
Torrey Pines Road, La Jolla, California, United States of America (hereinafter
referred to as "Agouron," the first party), and F. Hoffmann-La Roche Ltd, a
corporation duly organized and existing under the laws of Switzerland, having a
principal place of business at CH-4002-Basel, Switzerland, and Hoffmann-La Roche
Inc., a corporation duly organized and existing under the laws of the state of
New Jersey, having a principal place of business at 340 Kingsland Street,
Nutley, New Jersey, United States of America (hereinafter collectively referred
to as "Roche," the second party). Agouron and Roche are sometimes hereinafter
each referred to as a party (collectively "parties") to this Trademark License.
(Terms containing an initial capitalized letter, except as explicitly otherwise
indicated, shall have the meanings stated in the D&L Agreement, as defined
below.)
BACKGROUND
Agouron and Roche entered into an AG3340 Development and License Agreement dated
June 19, 1996. The AG3340 Development and License Agreement, as now or as
subsequently amended, is hereinafter referred to as the "D&L Agreement."
The parties have conducted collaborative development and commercialization
activities for the cancer inhibitor known as "AG3340"
*
pursuant to the terms of the D&L Agreement.
The D&L Agreement provides that a form trademark license shall be agreed upon by
the parties and attached to the D&L Agreement as Attachment 4. The D&L Agreement
also contains the following provisions concerning ownership and utilization of
Trademarks:
Section 1.34 "Trademark(s)"Section1.34Trademark(s)""2" means
any trademark selected and owned by a party and registered (or applied
for) by such party, its Affiliate(s) and sublicensee(s) in the
Territory for use in connection with the marketing of Products. The
definition of Trademark(s) shall not refer to trade names used by a
party to designate the name of such party.
A4-1
<PAGE>
Section 2.01 License Grants. . . .
* * *
(k) *
Section 3.03 Trademarks. *
A4-2
<PAGE>
Section 4.03 Marketing. . . .
* * *
(g) It is the intent of the parties that *
arising out of the Development Program for cancer indications
wherever possible throughout the Territory. The parties acknowledge *
arising out of the Development Program for cancer indications
wherever possible.
One or both of the parties is the owner(s) of the ___________ Trademark, in
certain countries of the Territory.
The parties intend to use the _____________ Trademark, including its associated
non-English translations (hereinafter collectively referred to as the "_________
Trademark"), only in connection with the marketing of AG3340 for cancer
indications.
NOW THEREFORE, in accordance with the provisions of the D&L Agreement, for good
and valuable consideration, the parties agree as follows:
TRADEMARK LICENSE
1. Under the provisions of the D&L Agreement, as more specifically set
forth above, each party granted to the other party, its Affiliates and
sublicensees a non-exclusive right to use the granting party's
Trademark(s) in the Territory in the marketing of the Compound and/or
Products arising out of the Development Program.
2. Products marketed using the ________ Trademark shall be manufactured
strictly in accordance with applicable governmental statutes,
regulations or directives.
3. The licensed user of the ________ Trademark shall comply with all
applicable governmental statutes, regulations or directives.
4. The licensed user of the ________ Trademark shall not use the ________
Trademark in a manner which is deceptive, or which would bring the
________ Trademark, the Product or the other party, into disrepute.
Each party shall use the ________ Trademark,
A4-3
<PAGE>
including its associated non-English translations, *
5. Pursuant to the terms of the D&L Agreement, Agouron and Roche shall
share obligations and responsibilities related to Trademark(s).
Provided a party fulfills its obligations and responsibilities related
to Trademark(s), and subject to the terms of the D&L Agreement, *
6. Each party shall, upon learning thereof, promptly notify the other
party in writing of any infringement by a third party of the parties'
rights in the ________ Trademark, or of any claim or suit by a third
party that the use of the ________ Trademark infringes or otherwise
violates the rights of a third party. The parties shall cooperate in
taking commercially reasonable legal actions to protect the parties'
rights in the ________ Trademark and/or to contest a claim by a third
party that the use of the ________ Trademark infringes or otherwise
violates any rights of a third party. *
7. Only the licenses granted pursuant to the express terms of this
Trademark License and the D&L Agreement shall be of any legal force and
effect. No license rights shall be created by implication or estoppel.
8. This Trademark License shall terminate in accordance with the
provisions of the D&L Agreement.
9. Any failure by either party to enforce any right which it may have
hereunder in any instance shall not be deemed to waive any right which
it or the other party may have in any other instance with respect to
any provisions of this Trademark License, including the provision which
such party has failed to enforce.
10. In the event that any provision of this Trademark License is judicially
determined to be unenforceable, in whole or in part, the remaining
provisions or portions thereof shall be valid and binding to the
fullest extent possible, and the parties shall endeavor to negotiate
additional terms, as feasible, in a timely manner so as to fully
effectuate the original intent of the parties, to the extent possible.
Ambiguities, if any, in this Trademark License shall not be construed
against any party, irrespective of which party may be deemed to have
authored the ambiguous provision.
A4-4
<PAGE>
11. This Trademark License and the D&L Agreement constitute the full
agreement of the parties with respect to the subject matter of this
Trademark License, and incorporate any prior discussions between them
with respect to such subject matter. This Trademark License shall not
be amended, supplemented or otherwise modified, except by an instrument
in writing signed by a duly authorized officer of each party.
12. If there is a conflict between the terms of this Trademark License and
the D&L Agreement, the terms of the D&L Agreement shall control.
13. This Trademark License shall be construed, and the rights of the
parties shall be determined, in accordance with the laws of the state
of California and the United States, without regard to conflict of law
provisions.
14. Any notice required or permitted to be given under this Trademark
License shall be in writing and shall be given in person, delivered by
recognized express delivery service, sent by mail (certified or
registered, or air mail for addresses outside of the continental
U.S.), or by telefax (or other similar means of electronic
communication) whose receipt is confirmed by confirming telefax, and
addressed, in the case of Agouron, to the Vice President, Commercial
Affairs (with a copy to the Legal Department) and, in the case of
Roche, to the Head of the Pharma Division (with a copy to the Legal
Department) at the respective addresses shown at the beginning of the
D&L Agreement, or such other person and/or address as may have been
furnished in writing to the notifying party in accordance with the
provisions of this paragraph. Except as otherwise provided herein,
any notice shall be deemed delivered upon the earlier of: (i) actual
receipt; (ii) two (2) business days after delivery to a recognized
express delivery service; (iii) five (5) business days after deposit
in the mail; or (iv) the date of receipt of the confirming telefax.
15. This Trademark License shall be binding upon all successors in
interest, assigns, trustees and other legal representatives of the
parties.
A4-5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Trademark License, in
triplicate originals, by their respective officers thereunto duly authorized as
of the day and year hereinabove written.
F. HOFFMANN-LA ROCHE LTD AGOURON PHARMACEUTICALS, INC.
By: By:
Name: Name:
Title: Title:
By: By:
Name: Name:
Title: Title:
HOFFMANN-LA ROCHE INC.
By:
Name:
Title:
By:
Name:
Title:
A4-6
EXHIBIT 10.38
PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED (DESIGNATED BY AN ASTERIX (*) AND
WHITE SPACE) AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT DATED
AUGUST 21, 1997; FILE NO. 0-15609
THYMITAQ
DEVELOPMENT AND LICENSE AGREEMENT
BETWEEN
F. HOFFMANN-LA ROCHE LTD AND HOFFMANN-LA ROCHE INC.
AND
AGOURON PHARMACEUTICALS, INC.
June 11, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page No.
<S> <C>
BACKGROUND .........................................................................................1
ARTICLE I DEFINITIONS..............................................................................1
Section 1.01 Affiliate................................................................................1
Section 1.02 Agouron Patent Rights....................................................................2
Section 1.03 Agouron Technology.......................................................................2
Section 1.04 Allowable Expenses.......................................................................2
Section 1.05 Combination Product......................................................................2
Section 1.06 Compound.................................................................................2
Section 1.07 Co-Promote...............................................................................3
Section 1.08 Control, Controlled or Controlling.......................................................3
Section 1.09 Development Costs........................................................................3
Section 1.10 Development Program......................................................................3
Section 1.11 Development Program Patent Rights........................................................4
Section 1.12 Development Program Technology...........................................................4
Section 1.13 Dossier..................................................................................4
Section 1.14 Effective Date...........................................................................4
Section 1.15 European Co-Promotion Countries..........................................................4
Section 1.16 Global Joint Development Committee.......................................................4
Section 1.17 Global Joint Finance Committee...........................................................5
Section 1.18 Global Joint Marketing Committee.........................................................5
Section 1.19 Initial Commercial Sale..................................................................5
Section 1.20 Marketing Company........................................................................5
Section 1.21 Net Sales................................................................................5
(a) Adjusted Gross Sales..............................................................5
(b) Net Sales.........................................................................5
Section 1.22 North American Territory.................................................................5
Section 1.23 Patent Rights............................................................................5
Section 1.24 Product..................................................................................6
Section 1.25 Profits and Losses.......................................................................6
Section 1.26 Registration.............................................................................6
Section 1.27 Roche Technology.........................................................................6
Section 1.28 Roche Territory..........................................................................6
Section 1.29 Territory................................................................................6
Section 1.30 Trade Dress..............................................................................6
Section 1.31 Trademark(s).............................................................................6
Section 1.32 United States............................................................................6
i
<PAGE>
TABLE OF CONTENTS
(Continued)
Page No.
<S> <C>
ARTICLE II COMMERCIAL RIGHTS........................................................................6
Section 2.01 License Grants...........................................................................6
Section 2.02 Non-Cancer Indications of the Compound..................................................10
Section 2.03 Diligent Efforts to Develop and Market..................................................10
Section 2.04 Discontinuance of the Development Program...............................................11
ARTICLE III SHARING AND PROTECTION OF INTELLECTUAL PROPERTY.........................................12
Section 3.01 Patents.................................................................................12
Section 3.02 Infringement of Patents of Third Parties................................................13
Section 3.03 Trademarks..............................................................................14
Section 3.04 Information Exchange....................................................................15
Section 3.05 Confidentiality.........................................................................15
Section 3.06 Publication.............................................................................16
ARTICLE IV MANAGEMENT STRUCTURE OF COLLABORATION...................................................17
Section 4.01 Management Committees...................................................................17
Section 4.02 Development and Registration............................................................17
Section 4.03 Marketing...............................................................................21
Section 4.04 Supply of Compound and Product..........................................................26
ARTICLE V LICENSE FEES, PROFIT AND LOSS SHARING AND ROYALTIES;
DEVELOPMENT COSTS; PREMARKETING EXPENSES;
GENERAL LICENSING TERMS.................................................................28
Section 5.01 License Fees, Profit and Loss Sharing and Royalties.....................................28
Section 5.02 Development Costs.......................................................................29
Section 5.03 Premarketing Expenses...................................................................30
Section 5.04 General Licensing Terms.................................................................31
Section 5.05 Foreign Currency........................................................................37
ARTICLE VI TERM AND TERMINATION....................................................................38
Section 6.01 Termination for Breach..................................................................38
Section 6.02 Termination by Roche....................................................................39
Section 6.03 Termination by Mutual Agreement.........................................................40
Section 6.04 Termination Upon Bankruptcy.............................................................40
Section 6.05 Disposition of Inventory................................................................40
Section 6.06 Effect of Termination...................................................................40
ii
<PAGE>
TABLE OF CONTENTS
(Continued)
Page No.
<S> <C>
ARTICLE VII WARRANTIES, COVENANTS; INDEMNITIES; INSURANCE;
DISPUTE RESOLUTION; GOVERNMENTAL APPROVALS;
EXPORT CONTROLS.........................................................................41
Section 7.01 Warranties and Covenants................................................................41
Section 7.02 Indemnities; Insurance..................................................................41
Section 7.03 Dispute Resolution......................................................................43
Section 7.04 Governmental Approvals..................................................................44
Section 7.05 Export Controls.........................................................................44
ARTICLE VIII DISCLOSURE OF AGREEMENT.................................................................44
Section 8.01 Disclosure of Agreement.................................................................44
ARTICLE IX GENERAL PROVISIONS......................................................................44
Section 9.01 No Implied Licenses.....................................................................44
Section 9.02 No Waiver...............................................................................44
Section 9.03 Severability; Government Acts...........................................................45
Section 9.04 Ambiguities.............................................................................45
Section 9.05 Notification of Authorities.............................................................45
Section 9.06 No Agency...............................................................................45
Section 9.07 Captions; Number; Official Language.....................................................45
Section 9.08 Force Majeure...........................................................................45
Section 9.09 Amendment...............................................................................46
Section 9.10 Applicable Law..........................................................................46
Section 9.11 Notices.................................................................................46
Section 9.12 Assignment..............................................................................46
Section 9.13 Succession..............................................................................47
APPENDICES
Schedule 1 Agouron Patent Rights..................................................................S1-1
Exhibit 1 Initial Development Plan for THYMITAQ Development Program..............................E1-1
Schedule 1 THYMITAQ Development Timeline - IV/PO...............................E1-S1-1
Exhibit 2 Initial Development Budget for THYMITAQ Development Program............................E2-1
Attachment 1 Development Costs and Reimbursement Procedures.........................................A1-1
Schedule 1 Agouron/Roche Development Program Expenditures......................A1-S1-1
Schedule 2 Agouron Development Cost Invoice ...................................A1-S2-1
Schedule 3 Roche Development Cost Invoice......................................A1-S3-1
Attachment 2 Accounting Terms/Definitions...........................................................A2-1
Attachment 3 Product Manufacturing Specifications...................................................A3-1
Attachment 4 Trademark License Agreement............................................................A4-1
iii
</TABLE>
<PAGE>
This THYMITAQ(TM)1 Development and License Agreement ("Agreement"),
dated for reference purposes only this 11th day of June 1997, is by and between
Agouron Pharmaceuticals, Inc., a corporation duly organized and existing under
the laws of the state of California, having a principal place of business at
10350 North Torrey Pines Road, La Jolla, California, United States of America
(hereinafter referred to as "Agouron," the first party), and F. Hoffmann-La
Roche Ltd, a corporation duly organized and existing under the laws of
Switzerland, having a principal place of business at CH-4002-Basel, Switzerland,
and Hoffmann-La Roche Inc., a corporation duly organized and existing under the
laws of the state of New Jersey, having a principal place of business at 340
Kingsland Street, Nutley, New Jersey, United States of America (hereinafter
collectively referred to as "Roche," the second party). Agouron and Roche are
sometimes hereinafter each referred to as a party (collectively "parties") to
this Agreement.
BACKGROUND
On June 19, 1996, Agouron and Roche entered into a Letter of Intent
("LOI") to confirm the parties formation of a collaboration on terms
substantially in accordance with those contained in Exhibit A to the LOI
("Exhibit A"). A component of such collaboration includes the development and
commercialization of the chemical compound known as "AG337" (sometimes referred
to herein as "THYMITAQ"), which was invented by Agouron employees. While Exhibit
A states the basic terms of the understanding between the parties, the parties
agreed that the terms of the collaboration would be subject to further
negotiation and preparation of further agreements containing the full terms of
the collaboration between the parties. This Agreement is entered into for the
purpose of setting forth the definitive terms under which the parties shall
collaborate in the development and commercialization of THYMITAQ products.
NOW, THEREFORE, in consideration of the premises, and the mutual
covenants, benefits and obligations set forth herein, the parties agree as
follows:
ARTICLE I - DEFINITIONS
When used in this Agreement, each of the following terms shall have the
meaning set out in this Article I. All references to Articles, Attachments,
Sections, Schedules, Exhibits and Appendices shall, except as otherwise
explicitly provided, refer to the Articles, Attachments, Sections, Schedules,
Exhibits and Appendices of this Agreement, all of which are incorporated herein
by reference.
Section 1.01 "Affiliate" means any person, organization or entity which
is, directly or indirectly, controlling, controlled by, or under common control
with Roche or Agouron, as the
- ----------
1 THYMITAQ is a trademark of Agouron Pharmaceuticals, Inc. and is registered
in the United States and in certain other countries.
1
<PAGE>
case may be. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
person or entity, means the possession, directly or indirectly, of the power to
direct, or cause the direction of, the management and policies of such person,
organization or entity, whether through the ownership of voting securities, or
by contract or court order or otherwise. The ownership of voting securities of a
person, organization or entity shall not, in and of itself, constitute "control"
for purposes of this definition, unless said ownership is of a majority of the
outstanding securities entitled to vote of such a person, organization or
entity. For purposes of this Agreement, Genentech, Inc. shall be considered to
be an Affiliate of Roche.
Section 1.02 "Agouron Patent Rights" means: *
Section 1.03 "Agouron Technology" means *
Section 1.04 "Allowable Expenses" has the meaning described
in Section 5.02 and Schedule 1 to Attachment 2.
Section 1.05 "Combination Product" means any *
Section 1.06 "Compound" means the chemical compound known as
AG337, whose chemical name is as follows:
*
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Section 1.07 "Co-Promote" means the right of a party, subject to
applicable law, to *
Countries where the parties are
Co-Promoting Products are sometimes referred to herein as "Co-Promotional
countries."
Section 1.08 "Control," "Controlled" or "Controlling" means *
Section 1.09 "Development Costs" has the meaning described in
Attachment 1.
Section 1.10 "Development Program" means all *
3
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Section 1.11 "Development Program Patent Rights" means *
Section 1.12 "Development Program Technology" means any *
Section 1.13 "Dossier" means the document which is filed with and
approved by a government or health authority for purposes of Registration, for
example, a New Drug Application or a Marketing Authorization Application.
Section 1.14 "Effective Date" means June 19, 1996.
Section 1.15 "European Co-Promotion Countries" means *
Section 1.16 "Global Joint Development Committee" has the meaning set
forth in Section 4.01.
4
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Section 1.17 "Global Joint Finance Committee" has the meaning set forth
in Section 4.01.
Section 1.18 "Global Joint Marketing Committee" has the meaning set
forth in Section 4.01.
Section 1.19 "Initial Commercial Sale " means the first commercial sale
of a Product arising out of the Development Program *
Section 1.20 "Marketing Company" means the company marketing
a Product in a country; provided, however, that if the *
Section 1.21 "Net Sales" and the related term "Adjusted Gross Sales"
shall have the following meanings:
(a) "Adjusted Gross Sales" means the *
(b) "Net Sales" means the amount calculated by subtracting from
the amount of Adjusted Gross Sales *
Section 1.22 "North American Territory" means the United States of
America, Canada and Mexico.
Section 1.23 "Patent Rights" means, collectively, *
5
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Section 1.24 "Product" means any *
Section 1.25 "Profits and Losses" have the meanings set forth in
Schedule 1 to Attachment 2.
Section 1.26 "Registration" means the official approval by the
government or health authority in a country (or supra-national organizations,
such as the European Agency for the Evaluation of Medical Products) which is
required for a Product to be offered for sale in such country, including such
authorizations as may be required for the production, importation, pricing,
reimbursement and sale of such Product, and for subsequent regulatory filings
for line extensions and/or additional indications of such Product.
Section 1.27 "Roche Technology" means any *
Section 1.28 "Roche Territory" means *
Section 1.29 "Territory" means *
Section 1.30 "Trade Dress" means any materials supporting the
commercialization of a Product, including, but not limited to, packaging,
package inserts, advertising or selling aids, brochures, mailings and/or other
marketing or packaging materials. The definition of Trade Dress shall not refer
to trade names used by a party to designate the name of such party.
Section 1.31 "Trademark(s)" means any trademark selected and owned by a
party and registered (or applied for) by such party, its Affiliate(s) and
sublicensee(s) in the Territory for use in connection with the marketing of
Products. The definition of Trademark(s) shall not refer to trade names used by
a party to designate the name of such party.
Section 1.32 "United States" means the United States of America, its
territories, possessions and protectorates (including Puerto Rico), and the
District of Columbia.
ARTICLE II - COMMERCIAL RIGHTS
Section 2.01 License Grants. To implement the commercialization of the
Compound and/or Products arising out of the Development Program, the parties,
subject to the other
6
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applicable obligations of this Agreement, grant and accept the license rights
provided below in this Article II.
(a) *
(b) *
(c) *
(d) In accordance with the provisions of Section 4.03, the
parties agree, unless prohibited by law or regulation, to *
(e) *
7
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(i) *
(ii) *
(f) *
* (g)
(h) *
8
<PAGE>
* (i)
(j) Notwithstanding anything to the contrary contained in this
Agreement, each party agrees to sell the Compound and/or Products for non-human
pharmaceutical uses only with the written agreement of the other party.
(k) *
(l) *
9
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(m) *
Section 2.02 Non-Cancer Indications of the Compound.
(a) Except as provided in Section 2.02(b) and Section 4.02(o), Agouron,
in its sole discretion, shall be entitled to make, use, develop and
commercialize the Compound for non-cancer indications.
(b) *
Section 2.03 Diligent Efforts to Develop and Market. The right of Roche
to market Products for cancer indications in all countries comprising the Roche
Territory shall be subject to diligent development and marketing efforts by
Roche, on a country-by-country basis. For purposes of this Section 2.03,
commercialization efforts undertaken by Roche's Affiliates and
sublicensees shall be attributed to Roche. Roche shall begin commercial sales of
at least one (1)
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Product arising out of the Development Program for cancer indications in a
country no later than one (1) year after the first Registration of such Product
for cancer indications in such country; provided, however, that such period
shall be extended for as long as diligent efforts to begin commercial sales
continue. Following commencement of commercial sales in a country, Roche shall
keep such Product reasonably available to the public for cancer indications;
provided, however, that Roche shall be released from this obligation if supply
of the Product for cancer indications is not available for such country and
Roche is not responsible for arranging for the commercial production and supply
of such Product for such country. Roche agrees to use diligent efforts to market
which are comparable to the efforts it then uses with its own cancer products.
If, after one hundred twenty (120) days written notice of a failure: (i) to
begin commercial sales of at least one (1) such Product for cancer indications
in a country in a timely manner; or (ii) following commencement of commercial
sales in a country, to keep such Product reasonably available to the public for
cancer indications, Roche fails to fulfill its obligation under this Section
2.03, Agouron shall have the right, as the sole and exclusive remedy for such
failure, to elect to have the licenses granted to Roche in such country under
the terms of Section 2.01(a) converted to a non-exclusive license to both
parties. Both parties, under such non-exclusive license, shall have the right
(with right of sublicense) to manufacture, use, offer for sale, sell and/or
import in or into such country such Product for cancer indications under
applicable Agouron Patent Rights and Development Program Patent Rights, and
using applicable Agouron Technology, Roche Technology and Development Program
Technology. Agouron, its Affiliates and sublicensees shall have no royalty or
other obligations to Roche resulting from the manufacture, use, offer for sale,
sale and/or import in or into such country of such Product by Agouron, its
Affiliates and sublicensees. No additional consideration shall be due because of
the exercise by Agouron of such election.
Section 2.04 Discontinuance of the Development Program. *
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ARTICLE III - SHARING AND PROTECTION OF INTELLECTUAL PROPERTY
Section 3.01 Patents.
(a) *
(b) *
(c) *
(d) *
12
<PAGE>
(e) *
(f) *
Section 3.02 Infringement of Patents of Third Parties. Each party, its
Affiliates and sublicensees, and their respective employees and agents shall use
diligent efforts to avoid infringement of patents of any third party in
discovering, developing, manufacturing and commercializing the Compound,
intermediates thereof and/or Products. However, neither party, its Affiliates
and sublicensees, and their respective employees and agents shall be liable to
the other party, its Affiliates and sublicensees, and their respective employees
and agents if the practice of the Patent Rights, Agouron Technology, Roche
Technology, and/or Development Program Technology in discovering, developing,
manufacturing or commercializing the Compound, intermediates thereof and/or
Products infringe any patent of any third party. If either party becomes aware
of any claim or suit by any third party for infringement of a patent of such
third party in connection with the discovery, development, manufacture, use or
sale of the Compound, intermediates thereof and/or Products by a party hereto,
such party shall notify the other party in writing of such claim or suit within
thirty (30) days thereafter. Each party agrees to render such reasonable
assistance as the other party may request in defending any such claim or suit.
The parties shall mutually agree to any settlement of any existing or potential
13
<PAGE>
infringement claim or action that would require the payment of any royalty or
lump sum payment to a third party, except that if the parties cannot promptly
reach agreement, they shall appoint an independent patent counsel to give an
opinion, which shall be binding on the parties, as to whether there is a
substantial risk that the third party patent is both valid and infringed. If the
opinion is that there is a substantial risk that the patent is both valid and
infringed, the marketing party of a Product in a country, after consultation
with the other party, may settle the matter in its sole discretion on such terms
as it deems appropriate. If both parties are participating in the marketing of a
Product in a country, the parties shall mutually agree to any settlement of any
infringement claim or action that would require the payment of any royalty or
lump sum payment to a third party; if the parties are unable to mutually agree
on the settlement, then the issue shall be decided by binding arbitration in
accordance with the provisions of Section 7.03 hereof. Unless the parties agree
otherwise, the costs of defending or settling any such claim or action in a
country where the parties are sharing Profits and Losses from the sales of such
Product shall be a deductible expense when calculating Profits and Losses for
such Product for such country. *
Section 3.03 Trademarks. *
14
<PAGE>
Section 3.04 Information Exchange.
(a) *
(b) *
Section 3.05 Confidentiality. Except as otherwise expressly specified
in this Agreement and except for the proper exercise of any license rights
granted or rights reserved under this Agreement, Roche and Agouron shall keep in
confidence and shall each use its best efforts to cause its respective
Affiliates, employees, directors, agents, consultants, clinical research
associates, outside contractors, clinical investigators and sublicensees to whom
it is permitted to disclose information pursuant to the terms of this Agreement
to retain in confidence: (i) all confidential and proprietary information of the
other party, *
and/or the marketing and
business plans of such other party that is disclosed to it hereunder; and (ii)
Development Program Technology. Without limiting the foregoing, Roche and
Agouron shall each exercise the same degree of diligence and care with respect
to the above-described information as it exercises with respect to its other
proprietary information. Each party represents to the other party that it
maintains policies and procedures designed to prevent the unauthorized
disclosure of its proprietary data and
15
<PAGE>
information. Agouron shall be responsible, under the direction of the Global
Joint Development Committee, for authorizing the supply of any drug samples of
the Compound and/or Products to third party researchers. Roche and Agouron shall
each be entitled to disclose the above-described information to consultants,
clinical research associates, outside contractors, collaborators, clinical
investigators and other third parties who are engaged, in accordance with the
procedures established under Section 4.02(h), and who are subject to
confidentiality and use obligations equivalent to those applicable to the
disclosing party hereunder, and to governmental or other regulatory and/or
health authorities, to the extent that such disclosure is reasonably necessary
to obtain patents, to obtain authorization or to conduct clinical trials on the
Compound or Products, to prepare the Dossier and/or otherwise to fulfill its
obligations pursuant to this Agreement. Roche and Agouron shall also have the
right to disclose Development Program Technology to persons it proposes to enter
into business relationships with, if such persons are subject to confidentiality
obligations equivalent to those applicable to the disclosing party hereunder.
The preceding obligations of confidentiality shall be waived as to information
which the party claiming waiver can demonstrate, based on written records: (i)
is in the public domain at the time of disclosure hereunder; (ii) comes into the
public domain through no fault of the party claiming waiver; (iii) was known to
the party claiming waiver prior to its disclosure under this Agreement, unless
such information was obtained from the other party on a confidential basis; (iv)
is disclosed on a non-confidential basis to the party claiming waiver by a third
party having a lawful right to make such disclosure on a non-confidential basis;
(v) is published with the prior mutual agreement of the parties after having
given consideration to appropriate commercial and competitive factors; (vi)
comes into the public domain through governmental publication of a patent
application; or (vii) is required to be disclosed to file a patent or other
regulatory application or to comply with applicable laws and regulations. The
obligations under this Section 3.05 shall survive to the later of: (i) ten (10)
years after the end of the Development Program; or (ii) the termination or
expiration date of the last to expire of any license(s) granted pursuant to this
Agreement, to the extent the Development Program Technology, Agouron Technology
or Roche Technology is applicable to the practice of grants under such
license(s); or (iii) the expiration date of the last to expire of any patent(s)
within the Patent Rights on a Product.
Section 3.06 Publication. Agouron and Roche each acknowledge the other
party's interest in publishing certain of its results of the Development Program
to obtain recognition within the scientific community and to advance the state
of scientific knowledge. Both parties also recognize their mutual interests in
obtaining valid patent protection for the Compound, intermediates thereof and
Products. Consequently, either party, its employees or consultants wishing to
make a publication shall provide the other party the opportunity to review a
draft manuscript at least thirty (30) days prior to the date of the intended
submission for publication and, upon the other party's written request, shall
delay submission for a period (not greater than forty-five (45) days from the
date of such written request) sufficient to provide for the filing of
appropriate patent application(s) for any patentable subject matter disclosed in
such publication. Furthermore, in acknowledgment that certain Development
Program Technology, while not of a patentable subject matter, could be necessary
for the protection of the commercial interests of the parties, the parties agree
that the Global Joint Development Committee or its delegates shall
16
<PAGE>
review in a timely manner (not greater than thirty (30) days from the date of a
written request to the Global Joint Development Committee or its delegates) a
draft manuscript, and propose the conditions under which the portion of the
Development Program Technology disclosed in the draft manuscript that could be
necessary to protect the commercial interests of the parties can be published.
If the Global Joint Development Committee or its delegates do not object to the
publication within thirty (30) days from the date of such written request, the
requesting party (subject to the other party's right to request the 45-day delay
described above for patentable subject matter disclosed in such publication)
shall be free to publish such manuscript. If the Global Joint Development
Committee or its delegates object to the publication of a portion of the draft
manuscript, it shall indicate specifically what modification to the draft
manuscript it believes is appropriate to protect the commercial interests of the
parties and the reasons therefor. After giving reasonable consideration to the
suggestions of the Global Joint Development Committee, the party wishing to make
a publication shall have the final authority to determine the scope, timing and
content of the publication.
ARTICLE IV - MANAGEMENT STRUCTURE OF COLLABORATION
Section 4.01 Management Committees. The collaborative development and
commercialization effort for the Compound and Products arising out of the
Development Program for cancer indications shall be coordinated and overseen by
three (3) committees, namely:
(a) A joint committee responsible to discuss and coordinate
the global development efforts directed to Registration of Products for
cancer indications (hereinafter referred to as the "Global Joint
Development Committee").
(b) A joint committee responsible to discuss and coordinate
the global marketing of Products for cancer indications (hereinafter
referred to as the "Global Joint Marketing Committee").
(c) A joint committee responsible to oversee and approve the
planning and budgeting of revenues and costs resulting from
Co-Promotional activities if the parties are Co-Promoting Products
(hereinafter referred to as the "Global Joint Finance Committee").
These committees (and the project teams established by such committees) shall
work in close cooperation.
Section 4.02 Development and Registration. Roche and Agouron
acknowledge their mutual intention generally to take a collaborative,
commercially reasonable approach to the timely development of the Compound and
Products arising out of the Development Program for cancer indications. The
parties further acknowledge their mutual willingness to discuss ad hoc
agreements to establish appropriate mechanisms for such collaborative
development. Recognizing the importance of timely initiation of development
activities, however, Roche and
17
<PAGE>
Agouron agree to the following basic approach to development of Products for
cancer indications and to the conduct of the Global Joint Development Committee
activities.
(a) The Global Joint Development Committee shall meet in regular
intervals, at least * and shall be co-chaired by representatives from Roche and
Agouron. Each party shall be entitled to participate in decisions affecting the
Development Program and to attend all key development-related meetings. The
meeting locations of the Global Joint Development Committee shall *
or at other sites as agreed to by the parties. Meeting minutes shall be
promptly prepared and approved by designated representatives of each of the
parties. Each party shall pay all of its respective expenses for such meetings.
(b) *
Each
party shall also
designate a financial advisor to the Global Joint Development Committee. Each
party's members of the Global Joint Development Committee shall reasonably
consider the adoption of the other party's development suggestions, and shall
accept as many of such development suggestions as are reasonable, based upon
medical and business rationale, drug supply, and the need to conduct the
development activities in an expeditious manner. If the parties agree, an
authorized sublicensee for a Compound which is participating in the development
of such Compound may participate in such discussions.
(c) If the Global Joint Development Committee is unable to reach
agreement on any decision required of it, the issue shall be submitted for
consideration, *
If they
are unable to agree, then the issue shall be resolved by the *
(d) The decisions of the Global Joint Development Committee shall be
binding on the parties and shall be confirmed in writing by designated
representatives of each of the parties.
(e) The Global Joint Development Committee shall be responsible
for the coordination of the global collaborative development efforts directed
to Registration of Products arising out of the Development Program for
cancer indications in the Territory and such other matters which the parties
mutually agree to assign to it. The Global Joint Development Committee may, if
necessary, modify *
provided, however, that the Development Program shall provide, at a minimum,
for: (i) the *
The
18
<PAGE>
Global Joint Development Committee shall also have the authority to make
decisions concerning the *
arising out of the Development Program for cancer indications.
Additionally, the Global Joint Development Committee shall establish
reasonable publication procedures concerning Development Program
Technology and, upon the request of a party, the Global
Joint Development Committee or its delegates shall review a draft manuscript and
propose the conditions under which the portion of the Development Program
Technology disclosed in the draft manuscript which is necessary to protect the
commercial interests of the parties can be published.
(f) The Global Joint Development Committee shall review and
discuss the Development Program for any country(s) involved, *
Development of Products arising out of the Development Program
for cancer indications shall be initially based upon *
and other
development activities to be performed by each of the parties. The Global
Joint Development Committee shall review and discuss any projected change in a
quarterly operating budget which exceeds the previously budgeted amount by
more than *
The parties acknowledge that, while the initial worldwide development plan
and development budget are designed to achieve Registration of Products arising
out of the Development Program for cancer indications in many countries of the
Territory, it will be necessary to supplement the initial development budget to
achieve Registration in other countries of the Territory. The Global Joint
Development Committee shall *
be attached to this Agreement as updated Exhibits. To the extent possible, the
Development Program shall provide for the generation and use of data which can
be utilized to achieve Registration *
Specific information which is required to achieve Registration in
individual countries shall be provided for, to the extent possible, in the
Development Program.
(g) Roche and Agouron shall collaborate to complete
clinical studies aimed at achieving Registration of Products arising out of
the Development Program *
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a party not responsible for a development
activity may provide advisory and support services to the other party. *
assigned
to such project teams. Roche and Agouron shall each use its diligent efforts
in the development and Registration of Products arising out of
the Development Program for cancer indications in accordance with the
Development Program. *
If a party fails to use its diligent efforts in a timely
manner in a study or other development activities assigned to it, the other
party shall be entitled to assume responsibility for conducting such study or
other development activities.
(h) Roche and Agouron shall each use qualified persons in the
development activities of the Development Program. In accordance with procedures
to be established by the Global Joint Development Committee, Agouron and Roche
may also engage consultants, clinical research associates, outside contractors,
collaborators, clinical investigators and other third parties, as may be
necessary or desirable, to assist them in carrying out their responsibilities
under the Development Program.
(i) All work in connection with the development of the Compound or
Products, to the extent required by applicable laws or regulations, shall be
conducted in accordance with Good Laboratory Practices, Good Manufacturing
Practices and Good Clinical Practices, as such rules of practice are amended
from time to time.
(j) Roche and Agouron, through the Global Joint Development Committee,
shall keep each other informed of the progress of the work being performed by
them pursuant to the Development Program. This shall include progress reports as
required by the Global Joint Development Committee*
Agouron and
Roche shall provide each other with access to its relevant records and
facilities to permit a reasonable review of the progress, from time to time, of
the activities being performed by such party pursuant to the Development
Program.
(k) Each party's members of the Global Joint Development Committee
shall report and make recommendations to their managements regarding the matters
discussed at the meetings of the Global Joint Development Committee.
(l) Each party agrees to use its diligent efforts in responding in a
timely manner, but not more than thirty (30) days, to requests from the other
party for preclinical and clinical results
20
<PAGE>
and other information concerning the Development Program to enable the other
party to comply with regulatory requirements for the Development Program. To the
extent possible, *
in the clinical studies aimed at achieving Registration of
Products arising out of the Development Program for cancer indications.
(m) After consultation with Roche concerning the selection of a generic
name for the Compound, Agouron shall have responsibility for making application
to the World Health Organization International Non-proprietary Name Committee
and the U.S. Adopted Names Council to secure a generic name for the Compound.
(n) Subject to the other provisions of this Agreement, in the
Roche Territory, *
for a Product arising out of the Development Program for cancer
indications *
in the North American Territory, the Dossier for a Product arising out of
the Development Program for cancer indications * Prior to Registration of a
Product arising out of the Development Program for cancer indications in a
country, the party *
on
such Product for cancer indications, including communicating with health and/or
regulatory authorities in such country; provided, however, to the extent
reasonably possible, the other party shall have the right to review, comment and
participate in communications concerning such Product with health and/or
regulatory authorities in such country. Notwithstanding the preceding, each
party shall be entitled to have *
as may
be necessary to obtain and maintain the Registration on a Product
arising out of the Development Program for cancer indications in any other
country in the Territory.
(o) *
Section 4.03 Marketing. The *
Roche and Agouron agree
to the following basic approach to marketing of Products for cancer
indications and the conduct of the Global Joint Marketing Committee activities:
(a) The Global Joint Marketing Committee shall meet in regular
intervals, at least * and shall be co-chaired by representatives from Roche and
Agouron. Each party shall be entitled to participate in discussions affecting
the marketing of Products
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arising out of the Development Program for cancer indications in the Territory
and to attend all key marketing-related meetings. The meeting locations of the
Global Joint Marketing Committee shall *
or at other sites as agreed to by the
parties. Meeting minutes shall be promptly prepared and approved by designated
representatives of each of the parties. Each party shall pay all of its
respective expenses for such meetings.
(b) *
(c) If the Global Joint Marketing Committee is unable to reach
agreement on any decision required of it, the issue shall be submitted for
consideration, *
If
they are unable to agree, then the issue shall be resolved by the *
(d) A decision of the Global Joint Marketing Committee shall be binding
on the parties, and shall be confirmed in writing by designated representatives
of each of the parties.
(e) The Global Joint Marketing Committee shall be responsible for
drafting a global marketing plan for a Product(s) arising out of the Development
Program for cancer indications (hereinafter referred to as the "Global Marketing
Plan") *
The
Global Joint Marketing Committee shall also be responsible for *
to the extent possible. The Global
Joint Marketing Committee may, if necessary, *
The Global Joint Marketing Committee may also review
and discuss decisions concerning the *
(f) Under the direction of the Global Joint Marketing Committee, Roche
shall be responsible for * for a Product arising out of the Development Program
for cancer indications *
To the extent possible, the local marketing
plans shall be consistent with the Global Marketing Plan.
(g) It is the intent of the parties that *
arising out of
the Development Program for cancer indications wherever possible throughout
the Territory. The parties acknowledge their intention to *
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arising out of the Development Program for cancer indications wherever possible.
The parties also acknowledge *
with
* arising out of the Development
Program for cancer indications wherever possible.
(h) The parties agree, unless prohibited by law or regulation, to
exclusively Co-Promote Products arising out of the Development Program for
cancer indications in the North American Territory under a single Trademark and
based upon a marketing plan to be agreed upon by the parties. Agouron and Roche
agree to share equally (50/50) Profits and Losses earned or incurred during the
fiscal year of the Marketing Company from the sale of a Co-Promoted Product in
the North American Territory. The parties further agree, unless prohibited by
law or regulation, to discuss in good faith future rights for Agouron to
exclusively Co-Promote with Roche Products arising out of the Development
Program for cancer indications in any or all of the European Co-Promotion
Countries. The parties' future European Co-Promotion arrangement shall be based
upon and subject to the following criteria:
(i) *
(ii) *
(iii) *
(iv) Agouron's right to Co-Promote such Product in a
selected European country shall be subject to *
(v) Agouron shall have the right to *
(vi) Agouron shall have the *
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(vii) *
In the countries where the parties are Co-Promoting Products, the Global Joint
Marketing Committee shall assign Co-Promotional activities among the parties
based upon: *
a
party not responsible for a Co-Promotional activity may provide advisory
and support services to the other party.
*
in each of the countries in the North American Territory
shall be overseen and approved by the Global Joint Marketing Committee.
Notwithstanding the preceding, the parties agree that *
Development Program for cancer indications in each of the countries in the
North American Territory * The parties shall provide *
Furthermore,
unless the parties agree otherwise, Agouron *
by the Global Joint Marketing Committee to Co-Promotional activities for such
Product in a European Co-Promotion Country *
The Global Joint Marketing Committee may *
to advise and support Co-Promotional
activities if the parties are Co-Promoting Products. The Global Joint
Marketing Committee shall establish procedures concerning the scope and
conduct of activities (including decision-making procedures) *
(i) The Global Joint Finance Committee shall *
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the parties, through the Global Joint
Marketing Committee, shall *
to a Co-Promotional country. If a party significantly fails to fulfill its
obligation to provide its agreed upon *
in a Co-Promotional country during a
fiscal year of the Marketing Company, then the parties shall negotiate in good
faith an appropriate adjustment in the Profit Sharing percentage for such
country for such fiscal year period.
(j) The Marketing Company in each country shall be responsible
for distribution of the Product in such country.
(k) *
(l) Roche and Agouron shall each use qualified persons in the marketing
activities of Products. In accordance with procedures to be established by the
Global Joint Marketing Committee, Agouron and Roche may also engage consultants,
and other third parties, as may be necessary or desirable, to assist them in
carrying out their marketing responsibilities provided that internal resources
are not then feasibly or practically available from either of the parties which
can perform in similarly expeditious and cost-efficient manner the tasks to be
assigned to such consultants and third parties; provided however, that each
party *
(m) Roche and Agouron, through the Global Joint Marketing Committee,
shall keep the other party informed of their marketing activities, and shall
review, discuss and agree upon the conduct of additional post-Registration
clinical studies for a Product for cancer indications which are not conducted as
part of the Development Program and marketing studies for a Product for cancer
indications; the conduct of clinical studies for a Product for cancer
indications which are conducted as part of the Development Program shall be
governed by the provisions of Section 4.02. This shall include progress reports
as required by the Global Joint Marketing Committee *
and the planned activities of the succeeding period.
(n) Each party's members of the Global Joint Marketing Committee shall
report and make recommendations to their managements regarding the matters
discussed at the meetings of the Global Joint Marketing Committee.
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(o) After Registration of a Product arising out of the Development
Program for cancer indications in a country, the Marketing Company of such
Product in such country shall be responsible for maintaining the Dossier for
such Product. The Marketing Company in a country shall be responsible for
responding, in a timely manner, to inquiries and for reporting adverse drug
reactions related to such Product after the Product is on the market in such
country. Notwithstanding the Marketing Company's ultimate responsibility for the
professional services and health and/or regulatory authorities communications
relating to such Product after the Product is on the market in a country, to the
extent reasonably possible, the other party shall have the right to review,
comment and participate in communications concerning such Product with the
health and/or regulatory authorities in such country. Furthermore, Agouron and
Roche shall each be entitled to respond to routine medical questions or
inquiries directed to them. Each party shall use its best efforts to provide the
other party with all information reasonably necessary to respond properly and
promptly to any such questions or inquiries; the parties shall also use their
best efforts to keep such information current. Without limiting the foregoing,
Agouron and Roche agree to notify the other party of any severe, serious,
alarming or unexpected complaints which they receive, whether or not determined
to be attributable to a Product, by telephone within twenty-four (24) hours and
in writing within three (3) business days of receipt of the complaint. All other
complaints shall be forwarded by a party to the other party within thirty (30)
calendar days of its receipt of the complaint. The parties shall confer with
respect to responding to anticipated inquiries and questions.
Section 4.04 Supply of Compound and Product.
(a) It is anticipated that timely development of the Compound and/or a
Product will require the manufacture of significant amounts of the Compound and
that successful worldwide commercialization of the Compound and/or a Product
will require annual production of large quantities of the Compound and/or a
Product.
As part of the Development Program for the Compound, *
the parties also agree to continue to use technically and
commercially reasonably efforts to reduce the costs of manufacturing the
Compound and a Product throughout the period of commercialization of the
Product. The Global Joint Development Committee shall have the authority to make
decisions concerning the sourcing of clinical trial supply of the Compound and
Products arising out of the Development Program for cancer indications. Roche
and Agouron, through the Global Joint Development Committee, agree to cooperate
to identify low-cost commercial manufacturing sources for the Compound and/or
Products arising out of the Development Program for cancer indications. To
assure a continuous supply of the Compound and/or a Product during clinical
development and commercialization, Roche and Agouron may also engage one or more
third party contract manufacturers for production of the Compound and/or a
Product. *
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(b) All Product is to be manufactured in accordance with the
specifications to be determined during development and later attached hereto in
Attachment 3 to this Agreement and any amendments thereto. All Product shall be
furnished with a certificate of analysis.
(c) Each party shall grant the other party a right of reference to the
drug master file for a Product in the countries where the other party, its
Affiliates or sublicensees are marketing such Product, and shall take all other
steps as may be reasonably requested by a manufacturer of such Product for the
limited purpose of enabling it to manufacture the Product for such other party.
The manufacturer shall manufacture the Product in compliance with the Dossier
for the Product. Each party shall promptly and fully advise the other party of
any changes, alterations or amendments to the drug master file for the Product
or any amendments, instructions or specifications required by the health or
regulatory authority, and the parties shall confer with respect to the best mode
of compliance with any such requirements.
(d) In the event any Product delivered hereunder must be recalled
because of action by the relevant health authority, the parties shall cooperate
fully with each other in conducting such recall to the full extent necessary to
ensure that the recall is effective. Prior to initial Registration of a Product
in a country, any recall expenses for such Product in such country shall be
included in the Development Costs. After initial Registration of a Product in a
country, the party marketing such Product in such country shall be responsible
for any recall expenses for such Product in such country. Any recall expenses
incurred by the party marketing a Product in a country shall be a deductible
expense when calculating Profits and Losses from the sales of such Product for
such country.
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ARTICLE V - LICENSE FEES, PROFIT AND LOSS SHARING AND ROYALTIES;
DEVELOPMENT COSTS; PREMARKETING EXPENSES;
GENERAL LICENSING TERMS
All of the accounting terms used in this Article V, if identified by
the use of capitalization of the first letter of each word, shall have the
meaning described in Attachment 2, which attachment shall also contain details
of the calculation, accounting, and sharing of Profits and Losses.
Section 5.01 License Fees, Profit and Loss Sharing and Royalties.
(a) In partial consideration for the rights granted to Roche by
Agouron, Roche hereby agrees to pay to Agouron non-refundable license issuance
fees as follows:
USD (MM)
--------
By June 28, 1996. $ 5.0
*
*
*
* *
*
* *
*
*
*
*
*
*
*
*
*
*
TOTAL *
(b) In partial consideration for the rights granted each of
the parties in this Agreement, the parties agree as follows:
(i) Unless the parties agree upon another sharing method,
Profits or Losses from the sales of Products arising out of the
Development Program for cancer indications in a country where the
parties are Co-Promoting Products shall be shared between the parties
in accordance with the provisions of Sections 4.03(h) and 4.03(i).
(ii) In countries where the parties are not Co-Promoting
Products, Roche shall pay Agouron *
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Section 5.02 Development Costs.
(a) The parties shall share Development Costs as follows:
(i) From the Effective Date, Roche shall be
responsible for payment of eighty percent (80%) of the Development
Costs *
and
Agouron shall be responsible for payment of twenty percent (20%) of
such Development Costs; provided, however, that Roche shall not be
responsible for Development Costs incurred for services performed
before June 19, 1996, even if such services are paid for after such
date. If Agouron has elected to Co-Promote a Product arising out of the
Development Program for cancer indications in one or more European
Co-Promotion Countries, *
(ii) Development Costs incurred for services *
In addition to its twenty percent (20%) share of
worldwide Development Costs because of its Co-Promotional
activities in the North American Territory, *
(iii) Agouron's prorata percentage share of Development
Costs for such European Co-Promotion Country *
(iv) Development Costs allocated to a European
Co-Promotion Country shall *
Unless
the parties agree otherwise, *
shall be deemed to have been incurred for the benefit of
*
(b) Within * days after the end of a semi-annual calendar period ending
on either June 30 or December 31 during which the parties have incurred
Development Costs, each party shall prepare and deliver to the other party a
full and true accounting of such party's actual Development Costs for such
semi-annual period. The form of the report shall be consistent with the format
presented in Schedule 1 to Attachment 1, and shall detail actual Development
Costs
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by major cost categories, consistent with the accounting classifications
and methods agreed upon by the parties. The accuracy of the report shall be
reviewed and signed by an appropriate financial employee of the reporting party.
The calculation of Development Costs shall not include any selling or marketing
costs and expenses.
(c) Development Costs shall be funded and reimbursed as described
in Attachment 1.
(d) Each party shall maintain books of account and complete and
accurate records of all of its Development Costs in sufficient detail to permit
the other party to confirm the correctness of such items. Each party shall
provide the other party, upon reasonable request, with copies of invoices
supporting significant third party expenditures. *
To the extent actual Development Costs
vary from reported Development Costs, adjustments shall be made to future
invoices.
(e) Additional details relating to the definition, calculation,
reporting requirements and reimbursement procedures for Development Costs are
set forth in Attachment 1.
Section 5.03 Premarketing Expenses. If Agouron and Roche are
Co-Promoting a Product arising out of the Development Program for cancer
indications in a country, then *
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Section 5.04 General Licensing Terms.
(a) Profits and Losses for countries where the parties are
Co-Promoting a Product arising out of the Development Program for cancer
indications shall be determined on *
Attachment 2 sets forth additional
definitions and details relating to the calculation of Profits and Losses.
(b) It is the intent of the parties that if the parties are
Co-Promoting a Product arising out of the Development Program for cancer
indications in a country, then the parties shall *
If applicable laws, regulations
or accounting rules do not permit such accounting treatment, *
(c) No sales shall be deemed to have occurred as the result of sales
between and among the parties, their Affiliates and sublicensees; it being
understood that sales occur when made to non-Affiliated third party purchasers.
A sale of a Product shall be deemed to have been made upon the earliest of
invoicing or delivery of the Product for value to a non-Affiliated third party
purchaser. In the case of a sale or other disposal of a Product for value other
than in an arm's length transaction exclusively for money, such as barter or
counter trade, sales shall be calculated using the fair market value of the
Product (if higher than the stated sales price) in the country of disposal.
(d) *
then the issue shall be decided by binding arbitration in
accordance with the provisions of Section 7.03 hereof.
(e) *
31
<PAGE>
(f) In calculating Profits and Losses with respect to a Combination
Product in a country, the parties shall enter into good faith negotiations
regarding the percentage of the Adjusted Gross Sales of such Combination Product
to be used in calculating Profits and Losses with respect to such Combination
Product in such country. If the parties are unable to agree upon such
percentage, the percentage of the Adjusted Gross Sales of such Combination
Product to be used in calculating Profits and Losses with respect to such
Combination Product in a country shall be equal to *
If the numerator and
denominator cannot be determined in the manner set forth above, then the
numerator *
In each case,
the cost is to be determined in accordance with the party's standard
accounting procedures.
(g) In calculating royalties with respect to a Combination Product, the
parties shall enter into good faith negotiations regarding the percentage of the
Net Sales of such Combination Product to be used in calculating royalties
payable with respect to such Combination Product on a country-by-country basis.
If the parties are unable to agree upon such percentage, royalties with respect
to a Combination Product in a country shall *
If the
numerator and denominator cannot be determined in the manner set forth above,
then the numerator shall be the *
In each
case, the cost is to be determined in accordance with the party's standard
accounting procedures.
(h) Division of Profits and Losses from the sales of a Product arising
out of the Development Program for cancer indications shall * from the date of
the Initial Commercial Sale or license to a third party, its Affiliates, or
sublicensees of such Product in such country (or, if the parties are
Co-Promoting a Product in a country, the date on which premarketing expenses are
first incurred), until *
32
<PAGE>
(i) Royalties due on the sale of a Product shall be payable on a
country-by-country basis from the date of Initial Commercial Sale by a party,
its Affiliates or sublicensees of such Product in such country, until *
Notwithstanding the preceding where a country is included in the European Union,
an extension in the period during which the payment of royalties is due on the
sale of a Product resulting from the application of the provisions of (iii)
above shall not be applicable if prohibited by law. The obligation to pay
royalties shall be imposed only once with respect to each unit of Product sold.
(j) The parties agree that the accounting and payment of Profits and
Losses and reimbursement of Allowable Expenses from the Co-Promotion of a
Product arising out of the Development Program for cancer indications in a
country shall comply with the following terms and conditions:
(i) As soon as possible, but no later than *
the Marketing Company in
such country shall provide the non-Marketing Company with
its good faith estimate of the amount of Adjusted Gross Sales and
Sublicense Revenues in such country for such Co-Promoted Product for
such calendar month, and the non-Marketing Company shall submit to
the Marketing Company its good faith estimate of its Sublicense
Revenues in such country for such Co-Promoted Product for such calendar
month.
(ii) * after the end of a calendar quarter in which the
parties have Co-Promoted a Product arising out of the Development
Program for cancer indications in a country, the Marketing Company
shall pay the non-Marketing Company its share of *
generated by the Co-Promotion of such Product in such country for
such calendar quarter, or submit to the non-Marketing Company an
invoice for its share of * in such country for such calendar quarter;
the
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<PAGE>
non-Marketing Company shall pay such invoice within * The * for a
calendar quarter shall be based on the *
for the applicable
calendar quarter and the *
for such country for the applicable calendar quarter (agreed to
by the parties pursuant to the provisions of Section 4.03(i)), as *
A party's share of *
for a country in a calendar quarter shall be determined
pursuant to the provisions of Section 5.01(b)(i).
(iii) * after the end of a calendar quarter in which the
parties have Co-Promoted a Product arising out of the Development
Program for cancer indications in a country, the Marketing Company
shall *
incurred in such country during such calendar quarter. A party's
*
shall be based on the budget for the applicable calendar
quarter (agreed to by the parties pursuant to the terms of Section
4.03(i)), as such budget is revised and updated. If the parties have *
(iv) * after the end of a semi-annual calendar period ending
on either June 30 or December 31 during which the parties have
Co-Promoted a Product arising out of the Development Program for cancer
indications, each party shall furnish and deliver to the other party a
full and true accounting of its actual Adjusted Gross Sales, Sublicense
Revenues and Allowable Expenses for such Product for such semi-annual
period for each country in which the parties have Co-Promoted such
Product. The reporting party's Adjusted Gross Sales, Sublicense
Revenues and Allowable Expenses for such semi-annual period shall be
reviewed and signed by an appropriate financial employee of the
reporting party.
(v) The net amount of any payment adjustments due
between the parties because of differences *
The
net amount of any payment adjustments due between the parties because
of differences in *
(vi) If a party in good faith disputes the correctness of a
portion of the other party's accounting, the party shall only be
obligated to reimburse the undisputed portion
34
<PAGE>
of *
and shall be
obligated to reimburse or pay the balance, if any, upon resolution
of the disputed issues. The parties agree to use their best
faith efforts to resolve any disputes concerning the correctness
of Allowable Expenses and the calculation of Profit and Losses as soon
as possible.
(vii) Any payments due pursuant to the terms of this Section
5.04(j) that are not paid on or before the date such payments are due
shall bear interest at the lower of: (A) the average one (1) month
London Interbank Offered Rates, as reported by Datastream from time to
time, plus one hundred (100) basis points; or (B) the highest interest
rate permitted by applicable law, calculated on the number of days in
each month that such payment is delinquent.
(k) The parties agree that the accounting and payment of royalties
shall comply with the following terms and conditions:
(i) As soon as possible, but no later than *
after the end of a calendar month, a party owing a royalty shall
provide the other party with its *
(ii) On or before the last business day in *
of each and every calendar year for as long as royalties are
due following the commencement of the marketing of Products, the party
owing the royalty shall pay to the other party a sum equal to the
aggregate of the royalty due on such party's *
(iii) * after the end of a semi-annual calendar period ending
on either June 30 or December 31 during which there was a Net Sale of a
Product upon which a royalty was due, the party owing the royalty shall
furnish and deliver to the other party a full and true accounting of
the actual Net Sales of such Product for such semi-annual period for
each country for which such royalty is due. The reporting party's
accounting of royalty for such semi-annual period shall be reviewed and
signed by an appropriate financial employee of the reporting party, and
shall identify all relevant details regarding *
(iv) The net amount of any payment adjustments due
between the parties because of differences in *
The net amount of any payment adjustments due between the parties
because of
35
<PAGE>
differences in *
(v) Any royalty payments due that are not paid on or before
the date such payments are due shall bear interest at the lower of: (A)
the average one (1) month London Interbank Offered Rates, as reported
by Datastream from time to time, plus one hundred (100) basis points;
or (B) the highest interest rate permitted by applicable law,
calculated on the number of days in each month that such payment is
delinquent.
(l) Each party shall maintain and cause its Affiliates and sublicensees
to maintain books of account and complete and accurate records pertaining to the
sale or other disposition of Products, Allowable Expenses and of the royalty and
other amounts payable under this Agreement in sufficient detail to permit the
other party to confirm the correctness of such items. *
36
<PAGE>
(m) A party owing a royalty or other payment to the other party shall
be entitled to withhold from such payment the amount, if any, of any withholding
tax assessable to the party due the payment, provided evidence of payment of any
such tax is promptly provided to such party. If any taxes (other than
value-added taxes) are imposed on payments of royalties or profits to Agouron or
Roche and are required to be withheld therefrom, such taxes shall be for the
account of Agouron or Roche, respectively, and the payments shall be reduced
accordingly. Roche and Agouron shall each advise the other and provide it with
copies of the tax receipts for all taxes deducted from the payment of royalties
or profits.
(n) The costs of defending or settling any claim or suit by any third
party for infringement of a patent of such third party by a party's practice of
the Patent Rights, Agouron Technology, Roche Technology, and/or Development
Program Technology in discovering, developing, manufacturing or commercializing
the Compound, intermediates thereof and/or Products shall be *
(o) Upon expiration of the foregoing Profits and Losses sharing or
royalty obligations in a country, which shall also be the expiration date of the
licenses granted in such country pursuant to Sections 2.01(a), 2.01(b), 2.01(c)
or 2.03, each party *
for cancer indications in such country on
a non-exclusive basis; provided, however, that *
(p) The parties agree in the future to use their reasonable efforts to
negotiate any additional licensing terms for the Compound, intermediates thereof
and/or Products arising out of the Development Program for cancer indications
which may be necessary to clarify the rights and obligations of the parties.
Section 5.05 Foreign Currency.
(a) Development Costs, Patent and Trademark Costs, Profits and Losses,
Adjusted Gross Sales, Net Sales, Sublicense Revenues, Allowable Expenses, and
any royalty amounts shall be stated in United States dollars. Payments of
Development Costs, Patent and Trademark Costs, Profits and Losses, Allowable
Expenses and royalties shall be made in United States dollars. Any required
conversion of Development Costs, Patent and Trademark Costs, Profits and Losses,
Adjusted Gross Sales, Net Sales, Sublicense Revenues, Allowable Expenses, and
any royalty amounts to United States dollars shall be done using the monthly
average rate of exchange for the calendar month in which such Development Costs,
Patent and Trademark Costs, Profits and Losses, Adjusted Gross Sales, Net Sales,
Sublicense Revenues, Allowable Expenses, and any royalty amounts were incurred
or first determined.
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<PAGE>
(b) The conversion from a foreign currency to United States
dollars shall be made by *
(c) *
(d) If London Interbank Offered Rates are no longer available due to
the implementation of the European Economic and Monetary Union, any reference to
the London Interbank Offered Rates in this Agreement shall be replaced by a
comparable reference interest rate for the single currency "EURO" determined at
the financial center where the reference is made. If no such reference interest
rate can be determined at such financial center, the parties shall agree upon a
new reference interest rate to be used as appropriate in this Agreement in lieu
of the unavailable London Interbank Offered Rates.
ARTICLE VI - TERM AND TERMINATION
Section 6.01 Termination for Breach. Either party may, at its option,
terminate this Agreement for cause in the event the other party shall commit a
material breach of this Agreement (including the failure of a party to pay its
undisputed share of Development Costs) and shall fail to cure such breach during
the one hundred twenty (120) day period (thirty (30) day period in the case of
any payment default) following receipt of a written notice of such breach from
the non-breaching party. After the end of the applicable cure period, the party
who has the right of termination may exercise its termination option by giving
the breaching party prior
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<PAGE>
written notice of at least fifteen (15) days of its election to terminate. Any
termination of this Agreement shall not release the breaching party from any
obligations incurred hereunder, and the non-breaching party shall be entitled to
pursue an action for damages arising as a result of such material breach.
Section 6.02 *
(a) *
(b) *
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<PAGE>
(c) *
Section 6.03 Termination by Mutual Agreement. The parties
may at any time terminate this Agreement, in part or in its entirety, by
mutual written agreement.
Section 6.04 Termination Upon Bankruptcy. In the event that a party is
subject to any proceeding under the bankruptcy laws, or to the appointment of a
receiver, trustee or liquidator of its business or substantially all of its
assets, and such proceeding, if involuntary, is not dismissed or discharged
within one hundred fifty (150) days after such proceeding is instituted, or upon
the liquidation, dissolution, or winding up of its business, then this
Agreement, at the election of the other party, shall be terminated in its
entirety for cause upon a notice in writing of at least fifteen (15) days from
the party who is not bankrupt or insolvent.
Section 6.05 Disposition of Inventory. In the event of the cancellation
or termination of any license rights with respect to a Product, inventory of
such Product may be sold for up to six (6) months after date of cancellation or
termination, provided required payments, if any, are paid thereon.
Section 6.06 Effect of Termination. The termination of this Agreement
shall, to the extent not otherwise expressly provided herein, not affect the
rights and obligations of the parties under this Agreement with respect to: (i)
the parties' obligations of confidentiality, indemnification and compensation
for services performed; (ii) a party's liability for failure to fulfill its
obligations or undertakings under this Agreement; and (iii) the rights or
obligations of the parties otherwise expressly stated in the Agreement to
survive the termination of this Agreement. If this Agreement is terminated,
Agouron's obligations under Sections 2.02(b) and 4.02(o) shall terminate. Any
other provisions of this Agreement which by their nature are intended to survive
termination shall also survive. Upon any termination of this Agreement in its
entirety because of a breach of the other party, neither party waives any rights
to any remedies it may have arising out of the termination. In the event of any
breach by a party with respect to obligations which continue after a termination
in its entirety of this Agreement, the non-breaching party shall have all
remedies available to it, as if the Agreement were still in effect on the date
of such breach.
<PAGE>
ARTICLE VII - WARRANTIES AND COVENANTS; INDEMNITIES; INSURANCE;
DISPUTE RESOLUTION; GOVERNMENTAL APPROVALS;EXPORT CONTROLS
Section 7.01 Warranties and Covenants.
(a) Each party represents and warrants to the other party that it has
the legal power, authority and right to enter into this Agreement and to perform
all of its respective obligations set forth herein, including the attachments
hereto.
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<PAGE>
(b) Agouron represents and warrants that, to the best of its knowledge,
it has disclosed to Roche the material results of preclinical and human clinical
testing of the Compound completed prior the Effective Date.
(c) Agouron represents and warrants that, as of the date this Agreement
is executed, it was not aware of the existence of any patents owned and
Controlled by a third party covering the Compound which would materially prevent
the parties from commercializing the Compound.
(d) Each party covenants that it shall not commit any act or fail to
take any action which, in any significant way, would be in conflict with its
material obligations under this Agreement and the attachments hereto.
(e) Each party promises to comply in all material respects with the
terms of the licenses granted to it under this Agreement, and with all federal,
state, local and foreign laws, rules and regulations applicable to the
development, manufacture, distribution, import and export, and sale of
pharmaceutical products pursuant to this Agreement.
(f) EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, EACH OF
THE PARTIES MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OF ANY SUBJECT MATTER INCLUDED WITHIN THE
CLAIMS OF THE PATENT RIGHTS, INCLUDING THE COMPOUND. THE PARTIES UNDERSTAND AND
AGREE THAT DEVELOPMENT AND COMMERCIALIZATION OF THE COMPOUND AND/OR PRODUCTS
WILL INVOLVE APPROVAL BY REGULATORY AUTHORITIES, AND THAT NO PARTY IS
GUARANTEEING THE SAFETY OR EFFICACY OF THE COMPOUND AND/OR PRODUCTS, OR THAT THE
COMPOUND AND/OR PRODUCTS WILL RECEIVE THE REQUIRED APPROVALS.
Section 7.02 Indemnities; Insurance.
(a) Roche shall indemnify and hold harmless Agouron and its Affiliates,
employees, and agents (an "Agouron Indemnified Party") from and against any and
all liabilities, losses, damages, costs, or expenses (including reasonable
investigative and attorneys' fees) which the Agouron Indemnified Party may
incur, suffer or be required to pay resulting from or arising in connection with
any product liability or other claims, other than claims for patent
infringement, arising from the use by any person of any Product, to the extent
such product liability or other claim results from the negligent, reckless or
intentional misconduct of Roche, its Affiliates or sublicensees, or their
respective employees and agents, or on account of Roche's failure to fulfill its
obligations or undertakings under this Agreement; provided, however, that in no
event shall Roche be liable to an Agouron Indemnified Party for any indirect,
incidental, special or consequential damages, including loss of revenues or
profits from sales of Products.
(b) Agouron shall indemnify and hold harmless Roche and its Affiliates,
employees, and agents (a "Roche Indemnified Party") from and against any and all
liabilities, losses,
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<PAGE>
damages, costs, or expenses (including reasonable investigative and attorneys'
fees) which the Roche Indemnified Party may incur, suffer or be required to pay,
resulting from or arising in connection with any product liability or other
claims, other than claims for patent infringement, arising from the use by any
person of any Product, to the extent such product liability or other claim
results from the negligent, reckless or intentional misconduct of Agouron, its
Affiliates or sublicensees, or their respective employees and agents, or on
account of Agouron's failure to fulfill its obligations or undertakings under
this Agreement; provided, however, that in no event shall Agouron be liable to a
Roche Indemnified Party for any indirect, incidental, special or consequential
damages, including loss of revenues or
profits from sales of Products.
(c) To the extent that a product liability or other claim, other than a
claim for patent infringement, results from the negligent, reckless or
intentional misconduct of both of the parties, their Affiliates, sublicensees,
or their respective employees and agents, the parties agree to share in an
equitable manner such liabilities, losses, damages, costs, or expenses in
proportion to the relative fault of each of the parties, their Affiliates,
sublicensees, or their respective employees and agents.
(d) Unless the parties agree otherwise, all other liabilities, losses,
damages, costs, or expenses (including reasonable investigative and attorneys'
fees) under this Section 7.02 relating to or involving a Product in a country,
except as provided by the terms of Sections 7.02(a), (b) and (c), shall be the
responsibility of the party marketing such Product in such country. The party
marketing a Product in a country shall indemnify the non-marketing party in such
country from and against any and all liabilities, losses, damages, costs, or
expenses (including reasonable investigative and attorneys' fees) which such
non-marketing party may incur, suffer or be required to pay resulting from or
arising in connection with any product liability or other claims, other than
claims for patent infringement, arising from the use by any person of such
Product in such country. Section 3.02 sets forth the parties' liability
obligations arising from claims for patent infringement. Any payments made by
the party marketing a Product in a country pursuant to the terms of this Section
7.02(d) shall be a deductible expense when calculating Profits and Losses from
the sales of such Product for such country.
(e) The aforesaid obligations of the indemnifying party shall
be subject to the indemnified party fulfilling the following obligations:
(i) The indemnified party shall fully cooperate with the
indemnifying party in the defense of any claims, actions, etc., which
defense shall be controlled by the indemnifying party.
(ii) The indemnified party shall not, except at its own cost,
voluntarily make any payment or incur any expense with respect to any
claim or suit without the prior written consent of the indemnifying
party, which consent such party shall not be required to give.
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(iii) Promptly after receipt by the indemnified party of
notice of the commencement of any litigation or threat thereof which
may reasonably lead to a claim for indemnification, such party shall
notify the indemnifying party.
(f) The parties agree to maintain appropriate amounts of product
liability insurance coverage.
Section 7.03 Dispute Resolution. In the event of any controversy or
claim arising out of or relating to any provision of this Agreement, the parties
shall try to settle their differences amicably between themselves. Any
unresolved disputes arising between the parties relating to, arising out of, or
in any way connected with this Agreement or any term or condition hereof, or the
performance by either party of its obligations hereunder, whether before or
after termination of this Agreement, except as otherwise provided in this
Agreement, shall be finally resolved by binding arbitration. Whenever a party
shall decide to institute arbitration proceedings, it shall give written notice
to that effect to the other party. The party giving such notice shall refrain
from instituting the arbitration proceedings for a period of sixty (60) days
following such notice. If Roche is the party initiating the arbitration, the
arbitration shall be held in San Diego, California, according to the rules of
the American Arbitration Association ("AAA"). If Agouron is the party initiating
the arbitration, the arbitration shall be held in Newark, New Jersey, according
to the rules of the AAA. The arbitration shall be conducted by a single
arbitrator mutually chosen by the parties. If the parties can not agree upon a
single arbitrator within fifteen (15) days after the institution of the
arbitration proceeding, then the arbitration shall be conducted by a panel of
three arbitrators appointed in accordance with AAA rules; provided, however,
that each party shall, within thirty (30) days after the institution of the
arbitration proceedings, appoint one arbitrator with the third arbitrator being
chosen by the other two arbitrators. If only one party appoints an arbitrator,
then such arbitrator shall be entitled to act as the sole arbitrator to resolve
the controversy. Any arbitration hereunder shall be conducted in the English
language, to the maximum extent possible. All arbitrator(s) eligible to conduct
the arbitration must agree to render their opinion(s) within thirty (30) days of
the final arbitration hearing. The arbitrator(s) shall have the authority to
grant injunctive relief and specific performance and to allocate between the
parties the costs of arbitration in such equitable manner as he determines;
provided, however, that each party shall bear its own costs and attorneys' and
witness' fees. Notwithstanding the terms of this Section 7.03, a party shall
also have the right to obtain, prior to the arbitrator(s) rendering the
arbitration decision, provisional remedies, including injunctive relief or
specific performance, from a court having jurisdiction thereof. The
arbitrator(s) shall, upon the request of either party, issue a written opinion
of the findings of fact and conclusions of law and shall deliver a copy to each
of the parties. Decisions of the arbitrator(s) shall be final and binding on all
of the parties. Judgment on the award so rendered may be entered in any court
having jurisdiction thereof.
Section 7.04 Governmental Approvals. Roche and Agouron shall obtain any
government approval(s) required to enable this Agreement to become effective, or
to enable any payment hereunder to be made, or any other obligation hereunder to
be observed or performed.
43
<PAGE>
Each party shall keep the other informed of its progress in obtaining any such
government approval and shall cooperate with the other party in any such
efforts.
Section 7.05 Export Controls. The parties agree to comply with the
United States laws and regulations governing exports and re-exports of the
Compound, intermediates thereof, Products, Development Program Technology,
Agouron Technology, Roche Technology, or any other technology or software
developed or disclosed as a result of this Agreement. The parties acknowledge
that any performance under this Agreement is subject to any restrictions which
may be imposed by the United States laws and regulations governing exports and
re-exports. Each party agrees to provide the other party with any reasonable
assistance, including written assurances which may be required by a competent
governmental authority and by applicable laws and regulations as a precondition
for any disclosure of technology or software by the other party under the terms
of this Agreement. The obligations of this Section 7.05 shall survive
termination or expiration of this Agreement.
ARTICLE VIII - DISCLOSURE OF AGREEMENT
Section 8.01 Disclosure of Agreement. Except as agreed to by the
parties, neither Agouron nor Roche shall release any information to any third
party with respect to any of the terms of this Agreement without the prior
written consent of the other, which consent will not unreasonably be withheld.
This prohibition includes, but is not limited to, press releases, educational
and scientific conferences, promotional materials and discussions with the
media. If a party determines that it is required by law to release information
to any third party regarding the terms of this Agreement, it shall notify the
other party of this fact prior to releasing the information. The notice to the
other party shall include the text of the information proposed for release. The
other party shall have the right to confer with the notifying party regarding
the necessity for the disclosure and the text of the information proposed for
release. Notwithstanding the preceding, Roche and Agouron shall each have the
right to disclose the terms of this Agreement to persons it proposes to enter
into business relationships with, if such persons are subject to confidentiality
and use obligations equivalent to those applicable to the disclosing party
hereunder.
ARTICLE IX - GENERAL PROVISIONS
Section 9.01 No Implied Licenses. Only the licenses granted pursuant to
the express terms of this Agreement shall be of any legal force and effect. No
license rights shall be created by implication or estoppel.
Section 9.02 No Waiver. Any failure by a party to enforce any right
which it may have hereunder in any instance shall not be deemed to waive any
right which it or the other party may have in any other instance with respect to
any provision of this Agreement, including the provision which such party has
failed to enforce.
44
<PAGE>
Section 9.03 Severability; Government Acts. In the event that any
provision of this Agreement is judicially determined to be unenforceable, in
part or in whole, with regard to any or all of the countries in the Territory,
the remaining provisions or portions of this Agreement shall be valid and
binding to the fullest extent possible, and the parties shall endeavor to
negotiate additional terms, as feasible, in a timely manner so as to fully
effectuate the original intent of the parties to the extent possible in the
applicable countries. In the event that any act, regulation, directive, or law
of a country, including its departments, agencies or courts, should make
impossible or prohibit, restrain, modify or limit any material act or obligation
of a party under this Agreement and, if any party to this Agreement is
materially adversely affected thereby, the parties shall attempt in good faith
to negotiate a lawful and enforceable modification to this Agreement which
substantially eliminates the material adverse effect; provided, that, failing
any agreement in that regard, the party who is materially adversely affected
shall have the right, at its option, to suspend or terminate this Agreement as
to such country.
Section 9.04 Ambiguities. Ambiguities, if any, in this Agreement shall
not be construed against any party, irrespective of which party may be deemed to
have authored the ambiguous provision.
Section 9.05 Notification of Authorities. After execution of this
Agreement, to the extent required by law, Agouron, after consultation with
Roche, shall notify the appropriate United States authorities about the terms of
this Agreement and Roche, after consultation with Agouron, shall notify the
appropriate European and other authorities about the terms of this Agreement.
The parties shall keep each other fully advised of the status and progress of
the notification procedures.
Section 9.06 No Agency. Agouron and Roche shall have the status of
independent contractors under this Agreement and nothing in this Agreement shall
be construed as an authorization of either party to act as an agent of the
other.
Section 9.07 Captions; Number; Official Language. The captions of the
Articles and Sections of this Agreement are for general information and
reference only, and this Agreement shall not be construed by reference to such
captions. Where applicable in this Agreement, the singular includes the plural
and vice versa. To the extent appropriate, the meaning of terms whose first
letters are capitalized, but which are variations of terms that are defined
elsewhere in this Agreement, shall each have the same meaning as the defined
term (e.g., "Co-Promoting" and "Co-Promotional" shall have the same meaning as
the defined term "Co-Promote," to the extent appropriate). English shall be the
official language of this Agreement and any license agreement provided for
hereunder, and all communications between the parties hereto shall be conducted
in that language.
Section 9.08 Force Majeure. Neither party shall be responsible to the
other party for any failure, delay or interruption in the performance of any of
its obligations under this Agreement if such failure, delay or interruption is
caused by any act of God, earthquake, fire, casualty, flood, war, epidemic,
riot, insurrection, or any act, exercise, assertion or requirement of
45
<PAGE>
a governmental authority, or other cause beyond the reasonable control of the
party affected if the party affected shall have used its best efforts to avoid
such occurrence. If either party believes that the performance of any of its
obligations under this Agreement will be delayed or interrupted as a result of
any of the reasons stated in this Section 9.08 and provided such party is able
to do so, such party shall promptly notify the other party of such delay or
interruption and the cause therefor, and shall provide such other party with its
estimate of when the performance of its obligations will recommence. When the
party affected is able to recommence the performance of obligations delayed or
interrupted as a result of any of the reasons stated in this Section 9.08, it
shall so notify the other party and, except as otherwise provided in this
Agreement, it shall promptly resume the performance of such obligations.
Section 9.09 Amendment. This Agreement, including the Attachments,
Exhibits, Schedules and Appendices, constitutes the full agreement of the
parties with respect to the subject matter of this Agreement, and incorporates
any prior discussions between them with respect to such subject matter. In the
event of any inconsistency between this Agreement and the LOI, including Exhibit
A thereto, the terms of this Agreement shall govern the development and
commercialization of Products. This Agreement, including the attachments hereto,
shall not be amended, supplemented or otherwise modified, except by an
instrument in writing signed by duly authorized officers of the parties.
Section 9.10 Applicable Law. This Agreement shall be construed and the
rights of the parties shall be determined in accordance with the laws of the
United States and the State of California, without regard to its conflict of law
provisions.
Section 9.11 Notices. Any notice required or permitted to be given
under this Agreement shall be in writing and shall be given in person, delivered
by recognized overnight delivery service, sent by mail (certified or registered
or air mail for addresses outside of the continental U.S.), or by telefax (or
other similar means of electronic communication), whose receipt is confirmed by
confirming telefax, and addressed, in the case of Agouron, to the Vice
President, Commercial Affairs (with a copy to the Legal Department) and, in the
case of Roche, to the Head of the Pharma Division (with a copy to the Legal
Department), at the addresses shown at the beginning of this Agreement, or such
other person and/or address as may have been furnished in writing to the
notifying party in accordance with the provisions of this Section 9.11. Except
as otherwise provided herein, any notice shall be deemed delivered upon the
earlier of: (i) actual receipt; (ii) two (2) business days after delivery to
such recognized overnight delivery service; (iii) five (5) business days after
deposit in the mail; or (iv) the date of receipt of the confirming telefax.
Section 9.12 Assignment. This Agreement shall not be assignable by
either party, except to an Affiliate, without the prior written consent of the
other party, which consent may be withheld at the sole discretion of the other
party. Any such assignment without the prior written consent of the other party
shall be void. If this Agreement is assigned to an Affiliate, the assigning
party shall still be responsible for all of the obligations specified in this
Agreement with respect to the assigning party. Notwithstanding the preceding, in
the event of: (i) a sale or transfer of all or substantially all of assignor's
assets; or (ii) the merger or consolidation of
46
<PAGE>
assignor with another company, this Agreement shall be assignable to the
transferee or successor company.
Section 9.13 Succession. This Agreement shall be binding upon
all successors in interest, assigns, trustees and other legal representatives
of the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in
triplicate originals, by their respective officers thereunto duly authorized, as
of the day and year hereinabove written.
F. HOFFMANN-LA ROCHE LTD AGOURON PHARMACEUTICALS, INC.
By: /s/ W. Henrich By: /s/ Gary Friedman, Esq.
Name: W. Henrich Name: Gary Friedman, Esq.
Title: Senior Vice President Title: V. P. & General Counsel
By: /s/ J.T. Arnold By: /s/ R. Kent Snyder
Name: J.T. Arnold Name: R. Kent Snyder
Title: Authorized Signatory Title: V.P., Commercial Affairs
HOFFMANN-LA ROCHE INC.
By: /s/ Stephen G. Sudouan
Name: Stephen G. Sudouan
Title: Sr. V.P., Pharmaceuticals
By: /s/ William H. Epstein
Name: William H. Epstein
Title: Assistant Secretary
47
<PAGE>
SCHEDULE 1
AGOURON PATENT RIGHTS
*
S1-1
<PAGE>
EXHIBIT 1
INITIAL DEVELOPMENT PLAN FOR THYMITAQ(TM) DEVELOPMENT PROGRAM
*
*
*
*
*
*
*
*
*
E1-1
<PAGE>
*
*
*
*
*
*
*
*
*
*
*
E1-2
<PAGE>
*
*
*
*
*
*
*
*
*
*
*
*
E1-3
<PAGE>
*
*
*
*
*
*
*
*
*
E1-4
<PAGE>
*
*
*
*
E1-5
<PAGE>
SCHEDULE 1 TO EXHIBIT
THYMITAQ(TM) DEVELOPMENT TIMELINE - IV/PO
*
E1-S1-1
<PAGE>
SCHEDULE 1 TO EXHIBIT
THYMITAQ(TM) DEVELOPMENT TIMELINE - IV/PO
*
E1-S1-2
<PAGE>
EXHIBIT 2
INITIAL DEVELOPMENT BUDGET FOR DEVELOPMENT PROGRAM
E2-1
<PAGE>
EXHIBIT 2 (continued)
INITIAL DEVELOPMENT BUDGET FOR THYMITAQ DEVELOPMENT PROGRAM
*
E2-2
<PAGE>
ATTACHMENT 1
DEVELOPMENT COSTS AND REIMBURSEMENT PROCEDURES
The purpose of this Attachment is to define Development Costs, and to describe
and define a methodology to fund and reimburse such Development Costs.
DEVELOPMENT COSTS
Development Costs means the costs of *
specifically incurred to further the Development Program. The calculation of
Development Costs shall take into consideration the following:
1. The cost of development personnel charging the Development Program
shall be calculated using a *
Aggregate * shall be calculated by applying an agreed to *
The * shall include the *
Such costs would include, but not be limited to, the following: *
The *
does not include any of the direct charges included in Paragraph 2
below. * charging the Development Program shall generally include
staff from the following disciplines:
*
Both parties shall
utilize the same * on a *
basis.
The initial * for the *
This * shall be *
Such adjusted rate may be compared to Agouron's
anticipated *
To the extent there are any significant
differences, the parties shall discuss the need for any revisions to
such rate.
2. Third party costs shall consist of specifically identifiable
contract services or materials which are necessary to supplement
the development capabilities of either Roche or Agouron, or
otherwise required in the Development Program. Such costs shall
include, but not be limited to, the following costs and services: *
A1-1
<PAGE>
All
such third party costs shall be charged to the Development Program when
incurred.
Patent and Trademark costs shall not be included in Development Costs
and shall be identified and billed separately.
REIMBURSEMENT
Estimated Development Costs shall be * and comply with the following terms and
conditions:
1. * Agouron
shall invoice Roche for 80% of its estimated Development Costs
for such quarter, and Roche shall invoice Agouron for 20% of its
estimated Development Costs for such quarter. Such estimated
Development Costs *
shall be based on the *
as such development budget is revised and updated pursuant to the
provisions of Section 4.02(f). A party's share of Development Costs in
a *
2. *
during which the parties have incurred Development Costs,
each party shall furnish and deliver to the other party a full and true
accounting of its Development Costs for such semi-annual period. The
reporting party's Development Costs for such semi-annual period shall
be reviewed and signed by an appropriate financial employee of the
reporting party.
3. *
4. If a party in good faith disputes the correctness of a portion of the
other party's accounting, the party *
A1-2
<PAGE>
The
parties agree to use their best faith efforts to resolve any disputes
concerning the correctness of Development Costs as soon as possible.
5. Any payments due pursuant to the terms of Section 5.02 that are not
paid on or before the date such payments are due shall bear interest at
the lower of: (i) the average one month London Interbank Offered Rates,
as reported by Datastream from time to time, plus 100 basis points; or
(ii) the highest interest rate permitted by applicable law, calculated
on the number of days in each month that such payment is delinquent.
6. Development Costs invoices shall be stated in United States dollars.
Payment of Development Costs shall be made in United States dollars.
Any Development Costs which are incurred outside of the United States
shall be converted to United States dollars using the procedures
described in Section 5.05.
A1-3
<PAGE>
SCHEDULE 1 TO ATTACHMENT 1
AGOURON / ROCHE
DEVELOPMENT PROGRAM EXPENDITURES
*
<TABLE>
<CAPTION>
INTERNAL STAFF COSTS:
Current Period Cumulative
<S> <C> <C>
* $ x.xx $ y.yy
* x.xx y.yy
* x.xx y.yy
* x.xx y.yy
* x.xx y.yy
* x.xx y.yy
* x.xx y.yy
* x.xx y.yy
* x.xx y.yy
* x.xx y.yy
---- ----
* xxx.xx yyy.yy
* x.xx
* $ xxx.xx $ yyy.yy
-------- --------
OUTSIDE SERVICES:
Current Period Cumulative
<S> <C> <C>
* $ x.xx $ y.yy
* x.xx y.yy
* x.xx y.yy
* x.xx y.yy
* x.xx y.yy
* x.xx y.yy
* x.xx y.yy
---- ----
Total Outside Services $ xxx.xx $ yyy.yy
-------- --------
TOTAL DEVELOPMENT COSTS $ x,xxx.xx $ y,yyy.yy
========== ==========
<FN>
NOTE: To the extent practicable, actual costs shall be presented in the same detail as that shown in the summary Development
Program budget in Exhibit 2.
</FN>
</TABLE>
A1-S1-1
<PAGE>
SCHEDULE 2 TO ATTACHMENT 1
AGOURON DEVELOPMENT COST INVOICE
MONTH 1X, 199X
<TABLE>
<CAPTION>
* * Total
<S> <C> <C>
1. * $ $
=========== =======
2. *
$ $
=========== ========
*2 * * Total
3. * $ $ $
============ ============ ========
4. * $ $ $
============ ============ ========
5. * $ $ $
============ ============ ========
6. *
$ $ $
============ =========== ========
* $ $ $
============ ============ ========
*
- ----------
2 *
3 *
</TABLE>
A1-S2-1
<PAGE>
SCHEDULE 3 TO ATTACHMENT 1
ROCHE DEVELOPMENT COST INVOICE
*
<TABLE>
<CAPTION>
* * Total
<S> <C> <C>
1. * $ $
=========== =======
2. *
$ $
=========== ========
*2 * * Total
3. * $ $ $
============ ============ ========
4. * $ $ $
============ ============ ========
5. * $ $ $
============ ============ ========
6. *
$ $ $
============ =========== ========
* $ $ $
============ ============ ========
*
- ----------
1 *
2 *
</TABLE>
A1-S2-1
<PAGE>
ATTACHMENT 2
ACCOUNTING TERMS/DEFINITIONS
All of the accounting terms used in this Attachment 2, if identified by the use
of capitalization of the first letter of each word, shall have the same meanings
described in the Definitions Section below.
ACCOUNTING TERMS AND PROFIT SHARING METHODOLOGY
Profits and Losses earned or incurred during the fiscal year of the Marketing
Company from the sales of Products arising out of the Development Program for
cancer indications in countries located in the North American Territory and/or
the European Co-Promotion Countries shall be shared by the parties if the
parties are Co-Promoting Products in such countries. The purpose of this
Attachment 2 is to describe and define the methodologies used to achieve such
sharing of Profits and Losses.
The Marketing Company shall be responsible for the *
The non-Marketing Company shall be responsible for the *
Profits and Losses resulting from North American Territory sales and from sales
in the European Co-Promotion Countries shall be calculated in United States
dollars. Payment of Profits generated by the Co-Promotion of a Product,
Allowable Expenses and remittance of Losses shall be made in United States
dollars. The conversion of non-United States dollar currencies to United States
dollars shall be made in accordance with the procedures set forth in Section
5.05.
The Global Joint Finance Committee (or a local project team established by the
Global Joint Finance Committee) shall, for each Co-Promotion Country, *
Allowable Expenses will be charged to the Product *
For that portion of *
A2-1
<PAGE>
DEFINITIONS
1. "Adjusted Gross Sales" shall have the meaning set forth in Section
1.21.
2. "Allowable Expenses" shall include the following internal and external
expenses incurred in the commercialization of Products: *
3. "Cost of Goods Sold" shall mean the *
4. "Distribution Expenses," with the exception of *
A2-2
<PAGE>
5. "General and Administrative Expenses," *
6. "Marketing, Advertising and Education Expenses" shall mean the *
(a) *
A2-3
<PAGE>
(b) *
(c) *
7. "Premarketing Expenses" shall mean *
8. "Profits and Losses" *
(a) *
(b) *
A2-4
<PAGE>
9. "Selling and Promotion Expenses" shall mean *
(a) *
(b) *
A2-5
<PAGE>
10. *
A2-6
<PAGE>
ATTACHMENT 3
PRODUCT MANUFACTURING SPECIFICATIONS
THE TERMS OF THE PRODUCT MANUFACTURING SPECIFICATIONS WILL BE
AGREED UPON PRIOR TO COMMERCIALIZATION
A3-1
<PAGE>
ATTACHMENT 4
TRADEMARK LICENSE AGREEMENT
This Trademark License, effective as of June 19, 1996, is between Agouron
Pharmaceuticals, Inc., a corporation duly organized and existing under the laws
of the state of California, having a principal place of business at 10350 North
Torrey Pines Road, La Jolla, California, United States of America (hereinafter
referred to as "Agouron," the first party), and F. Hoffmann-La Roche Ltd, a
corporation duly organized and existing under the laws of Switzerland, having
its principal place of business at CH-4002-Basel, Switzerland, and Hoffmann-La
Roche Inc., a corporation duly organized and existing under the laws of the
state of New Jersey, having a principal place of business at 340 Kingsland
Street, Nutley, New Jersey, United States of America (hereinafter collectively
referred to as "Roche," the second party). Agouron and Roche are sometimes
hereinafter each referred to as a party (collectively "parties") to this
Trademark License.
(Terms containing an initial capitalized letter, except as explicitly otherwise
indicated, shall have the meanings stated in the D&L Agreement, as defined
below.)
BACKGROUND
Agouron and Roche entered into a THYMITAQ(TM) Development and License Agreement
dated June 19, 1996. The THYMITAQ Development and License Agreement, as now or
as subsequently amended, is hereinafter referred to as the "D&L Agreement."
The parties have conducted collaborative development and commercialization
activities for the cancer inhibitor known as "AG337" *
pursuant to the terms of the D&L Agreement.
The D&L Agreement provides that a form trademark license shall be agreed upon by
the parties and attached to the D&L Agreement as Attachment 4. The D&L Agreement
also contains the following provisions concerning ownership and utilization of
Trademarks:
Section 1.31 "Trademark(s)" means any trademark selected and
owned by a party and registered (or applied for) by such party, its
Affiliate(s) and sublicensee(s) in the Territory for use in connection
with the marketing of Products. The definition of Trademark(s) shall
not refer to trade names used by a party to designate the name of such
party.
A4-1
<PAGE>
Section 2.01 License Grants. . . .
* * *
(k) *
Section 3.03 Trademarks. *
A4-2
<PAGE>
Section 4.03 Marketing. . . .
* * *
(g) It is the intent of the parties that *
arising out of the Development Program for cancer indications
wherever possible throughout the Territory. The parties acknowledge
their intention to *
arising out of the Development Program for cancer indications
wherever possible. The parties also acknowledge *
arising out
of the Development Program for cancer indications wherever possible.
One or both of the parties is the owner(s) of the THYMITAQ Trademark, in certain
countries of the Territory.
The parties intend to use the THYMITAQ Trademark, including its associated
non-English translations (hereinafter collectively referred to as the "THYMITAQ
Trademark"), only in connection with the marketing of AG337 for cancer
indications.
NOW THEREFORE, in accordance with the provisions of the D&L Agreement, for good
and valuable consideration, the parties agree as follows:
TRADEMARK LICENSE
1. Under the provisions of the D&L Agreement, as more specifically set
forth above, each party granted to the other party, its Affiliates and
sublicensees a non-exclusive right to use the granting party's
Trademark(s) in the Territory in the marketing of the Compound and/or
Products arising out of the Development Program.
A4-3
<PAGE>
2. Products marketed using the THYMITAQ Trademark shall be manufactured
strictly in accordance with applicable governmental statutes,
regulations or directives.
3. The licensed user of the THYMITAQ Trademark shall comply with all
applicable governmental statutes, regulations or directives.
4. The licensed user of the THYMITAQ Trademark shall not use the THYMITAQ
Trademark in a manner which is deceptive, or which would bring the
THYMITAQ Trademark, the Product or the other party, into disrepute.
Each party shall use the THYMITAQ Trademark, including its associated
non-English translations, *
5. Pursuant to the terms of the D&L Agreement, Agouron and Roche shall
share obligations and responsibilities related to Trademark(s).
Provided a party fulfills its obligations and responsibilities related
to Trademark(s), and subject to the terms of the D&L Agreement,
*
6. Each party shall, upon learning thereof, promptly notify the other
party in writing of any infringement by a third party of the parties'
rights in the THYMITAQ Trademark, or of any claim or suit by a third
party that the use of the THYMITAQ Trademark infringes or otherwise
violates the rights of a third party. The parties shall cooperate in
taking commercially reasonable legal actions to protect the parties'
rights in the THYMITAQ Trademark and/or to contest a claim by a third
party that the use of the THYMITAQ Trademark infringes or otherwise
violates any rights of a third party. *
7. Only the licenses granted pursuant to the express terms of this
Trademark License and the D&L Agreement shall be of any legal force and
effect. No license rights shall be created by implication or estoppel.
8. This Trademark License shall terminate in accordance with the
provisions of the D&L Agreement.
9. Any failure by either party to enforce any right which it may have
hereunder in any instance shall not be deemed to waive any right which
it or the other party may have in
A4-4
<PAGE>
any other instance with respect to any provisions of this Trademark
License,including the provision which such party has failed to enforce.
10. In the event that any provision of this Trademark License is judicially
determined to be unenforceable, in whole or in part, the remaining
provisions or portions thereof shall be valid and binding to the
fullest extent possible, and the parties shall endeavor to negotiate
additional terms, as feasible, in a timely manner so as to fully
effectuate the original intent of the parties, to the extent possible.
Ambiguities, if any, in this Trademark License shall not be construed
against any party, irrespective of which party may be deemed to have
authored the ambiguous provision.
11. This Trademark License and the D&L Agreement constitute the full
agreement of the parties with respect to the subject matter of this
Trademark License, and incorporate any prior discussions between them
with respect to such subject matter. This Trademark License shall not
be amended, supplemented or otherwise modified, except by an instrument
in writing signed by a duly authorized officer of each party.
12. If there is a conflict between the terms of this Trademark License and
the D&L Agreement, the terms of the D&L Agreement shall control.
13. This Trademark License shall be construed, and the rights of the
parties shall be determined, in accordance with the laws of the state
of California and the United States, without regard to conflict of law
provisions.
14. Any notice required or permitted to be given under this Trademark
License shall be in writing and shall be given in person, delivered by
recognized express delivery service, sent by mail (certified or
registered, or air mail for addresses outside of the continental U.S.),
or by telefax (or other similar means of electronic communication)
whose receipt is confirmed by confirming telefax, and addressed, in
the case of Agouron, to the Vice President, Commercial Affairs (with
a copy to the Legal Department) and, in the case of Roche, to the
Head of the Pharma Division (with a copy to the Legal Department) at
the respective addresses shown at the beginning of the D&L Agreement,
or such other person and/or address as may have been furnished in
writing to the notifying party in accordance with the provisions of
this paragraph. Except as otherwise provided herein, any notice
shall be deemed delivered upon the earlier of: (i) actual receipt;
(ii) two (2) business days after delivery to a recognized express
delivery service; (iii) five (5) business days after deposit in the
mail; or (iv) the date of receipt of the confirming telefax.
15. This Trademark License shall be binding upon all successors in
interest, assigns, trustees and other legal representatives of the
parties.
A4-5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Trademark License, in
triplicate originals, by their respective officers thereunto duly authorized as
of the day and year hereinabove written.
F. HOFFMANN-LA ROCHE LTD AGOURON PHARMACEUTICALS, INC.
By: By:
Name: Name:
Title: Title:
By: By:
Name: Name:
Title: Title:
HOFFMANN-LA ROCHE INC.
By:
Name:
Title:
By:
Name:
Title:
A4-6
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE - NET
(DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS)
1. Basic Provisions ("Basic Provisions")
1.1 Parties: This Lease ("Lease"), dated for reference purposes only, June
13, 1997, is made by and between LMC - Sorrento Investment Company, LLC, a
California limited liability company ("Lessor") and Agouron Pharmaceuticals,
Inc., a California corporation ("Lessee"), (collectively the "Parties," or
individually a "Party").
1.2 Premises: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known as 4215 Sorrento Valley Blvd., San Diego, California, located in the
County of San Diego, State of California, and generally described as a Building
which (when the improvements have been completed) shall consist of approximately
54,000 square feet (approximately 33,000 sq. ft. on first floor and 21,000 sq.
ft. on second floor) on land having an area of approximately 150,718 sq. ft.
("Premises"). (See also Paragraph 2)
1.3 Term: See Addendum years and _____ months ("Original Term")
commencing See Addendum ("Commencement Date") and ending See Addendum
("Expiration Date"). (See also Paragraph 3)
1.4 Early Possession: N/A ("Early Possession Date").
(See also Paragraphs 3.2 and 3.3)
1.5 Base Rent: $ See Addendum per month ("Base Rent"), payable on the
first day of each month commencing Rent Commencement Date (See Addendum) (See
also Paragraph 4)
/X/ If this box is checked, there are provisions in this Lease for the Base
Rent to be adjusted.
1.6 Base Rent Paid Upon Execution: $ See Addendum as Base Rent for the
period See Addendum.
1.7 Security Deposit: $ See Addendum ("Security Deposit"). (See also
Paragraph 5)
1.8 Agreed Use: Any use consistent with zoning of the Premises. (See
also Paragraph 6)
1.9 Insuring Party. Lessor is the "Insuring Party" unless otherwise
stated herein. (See also Paragraph 8)
1.10 Real Estate Brokers: (See also Paragraph 15)
(a) Representation: The following real estate brokers (collectively,
the "Brokers") and brokerage relationships exist in this transaction (check
applicable boxes):
/X/ CB Commercial represents Lessor exclusively ("Lessor's Broker"); /X/
Colliers/Illif/Thorn represents Lessee exclusively ("Lessee's Broker"); or / /
N/A represents both Lessor and Lessee ("Dual Agency").
(b) [No text]
1.11 Guarantor. The obligations of the Lessee under this Lease are to
be guaranteed by N/A ("Guarantor"). (See also Paragraph 37)
1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 1.3 through 54 and Exhibits 1 (SNDA) and 2 (Site Plan),
all of which constitute a part of this Lease.
2. Premises.
2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease and the Addendum.
See Addendum, Sec. 1.5.3.
2.2 Condition. See Addendum, Sec. 51.
2.3 Compliance. Subject to the Addendum, Sec. 50. Lessor warrants that the
improvements on the Premises comply with all applicable laws, covenants or
restrictions of record, building codes, regulations and ordinances ("Applicable
Requirements") in effect on the Start Date. Said warranty does not apply to the
use to which Lessee will put the Premises or to any Alterations or Utility
Installations (as defined in Paragraph 7.3(a)) made or to be made by Lessee.
NOTE: Lessee is responsible for determining whether or not the zoning is
appropriate for Lessee's intended use, and acknowledges that past uses of the
Premises may no longer be allowed. If the Premises do not comply with said
warranty, Lessor shall, except as otherwise provided, promptly after receipt of
written notice from Lessee setting forth with specificity the nature and extent
of such non-compliance, rectify the same at Lessor's expense. If Lessee does not
give Lessor written notice of a non-compliance with this warranty within six (6)
months following the Start Date, corrections of that non-compliance shall be the
obligation of Lessee at Lessee's sole cost and expense. If the Applicable
Requirements are hereafter changed (as opposed to being in existence at the
Start Date, which is addressed in Paragraph 6.2 (e) below) so as to require
during the term of this Lease the construction of an addition to or an
alteration of the Building, the remediation of any Hazardous Substance, or the
reinforcement or other physical modification of the Building ("Capital
Expenditure"), Lessor and Lessee shall allocate the cost of such work as
follows:
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(a) Subject to Paragraph 2.3(c) below, if such Capital Expenditures
are required as a result of the specific and unique use of the Premises by
Lessee as compared with uses by tenants in general, Lessee shall be fully
responsible for the cost thereof, provided, however that if such Capital
Expenditure is required during the last two (2) years of this Lease and the cost
thereof exceeds six (6) months' Base Rent, Lessee may instead terminate this
Lease unless Lessor notifies Lessee, in writing, within ten (10) days after
receipt of Lessee's termination notice that Lessor has elected to pay the
difference between the actual cost thereof and the amount equal to six (6)
months' Base Rent. If Lessee elects termination, Lessee shall immediately cease
the use of the Premises which requires such Capital Expenditure and deliver to
Lessor written notice specifying a termination date at least ninety (90) days
thereafter. Such termination date shall, however, in no event be earlier than
the last day that Lessee could legally utilize the Premises without commencing
such Capital Expenditure.
(b) If such Capital Expenditure is not the result of the specific and
unique use of the Premises by Lessee (such as, governmentally mandated seismic
modifications), then Lessor and Lessee shall allocate the obligation to pay for
such costs pursuant to the provisions of Paragraph 7.1(c); provided, however,
that if such Capital Expenditure is required during the last two years of the
Lease or if Lessor reasonably determines that it is not economically feasible to
pay its share thereof, Lessor shall have the option to terminate this Lease upon
ninety (90) days prior written notice to Lessee unless Lessee notifies Lessor,
in writing, within ten (10) days after receipt of Lessor's termination notice
that Lessee will pay for such Capital Expenditure. If Lessor does not elect to
terminate, and fails to tender its share of any such Capital Expenditure, Lessee
may advance such funds and deduct same, with Interest, from Rent until Lessor's
share of such costs have been fully paid. If Lessee is unable to finance
Lessor's share, or if the balance of the Rent due and payable for the remainder
of this Lease is not sufficient to fully reimburse Lessee on an offset bases,
Lessee shall have the right to terminate this Lease upon thirty (30) days
written notice to Lessor.
(c) Notwithstanding the above, the provisions concerning Capital
Expenditures are intended to apply only to non-voluntary, unexpected, and new
Applicable Requirements. If the Capital Expenditures are instead triggered by
Lessee as a result of an actual or proposed change in use, change in intensity
of use, or modification to the Premises then, and in that event, Lessee shall be
fully responsible for the cost thereof, and Lessee shall not have any right to
terminate this Lease.
2.4 Acknowledgments. Lessee acknowledges that: (a) it has been advised by
Lessor and/or Brokers to satisfy itself with respect to the condition of the
Premises (including but not limited to the electrical, HVAC and fire sprinkler
systems, security, environmental aspects, and compliance with Applicable
Requirements), and their suitability for Lessee's intended use, (b) Lessee has
made such investigation as it deems necessary with reference to such matters and
assumes all responsibility therefor as the same relate to its occupancy of the
Premises, and (c) neither Lessor, Lessor's agents, nor any Broker has made any
oral or written representations or warranties with respect to said matters other
than as set forth in this Lease. In addition, Lessor acknowledges that: (a)
Broker has made no representations, promises or warranties concerning Lessee's
ability to honor the Lease or suitability to occupy the Premises, and (b) it is
Lessor's responsibility to investigate the financial capability and/or
suitability of all proposed tenants.
2.5 Lessee as Prior Owner/Occupant. [No text.]
3. Term.
3.1 Term. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.2 Early Possession. If Lessee totally or partially occupies the Premises
prior to the Commencement Date, the obligation to pay Rent shall be abated for
the period of such early possession. Any such early possession shall not affect
the Expiration Date.
3.3 Delay in Possession. See Addendum, Sec. 50, 51.
3.4 Lessee Compliance. Lessor shall not be required to tender possession of
the Premises to Lessee until Lessee complies with its obligation to provide
evidence of insurance (Paragraph 8.5). Pending delivery of such evidence, Lessee
shall be required to perform all of its obligations under this Lease from and
after the Start Date, including the payment of Rent, notwithstanding Lessor's
election to withhold possession pending receipt of such evidence of insurance.
Further, if Lessee is required to perform any other conditions prior to or
concurrent with the Start Date, the Start Date shall occur but Lessor may elect
to withhold possession until such conditions are satisfied. 4. Rent.
4.1 Rent Defined. All monetary obligations of Lessee to Lessor under
the terms of this Lease (except for the Security Deposit) are deemed to be rent
("Rent").
4.2 Payment. Lessee shall cause payment of Rent to be received by Lessor in
lawful money of the United States, without offset or deduction, on or before the
day on which it is due. Rent for any period during the term hereof which is for
less than one (1) full calendar month shall be prorated based upon the actual
number of days of said month. Payment of Rent shall be made to Lessor at its
address stated herein or to such other persons or place as Lessor may from time
to time designate in writing. Acceptance of a payment which is less than the
amount then due shall not be a waiver of Lessor's rights to the balance of such
Rent, regardless of Lessor's endorsement of any check so stating. 5. Security
Deposit. Lessee shall deposit with Lessor upon execution hereof the Security
Deposit as security for Lessee's faithful performance of its obligations under
this Lease. If Lessee fails to pay Rent, or otherwise Defaults under this Lease,
Lessor may use, apply or retain all or any portion of said Security Deposit for
the payment of any amount due Lessor or to reimburse or compensate Lessor for
any liability, expense, loss or damage which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of said Security
Deposit, Lessee shall within ten (10) days after written request therefor
deposit monies with Lessor sufficient to restore said Security Deposit to the
full amount required by this Lease. Lessor shall not be required to keep the
Security Deposit separate from its general accounts. Within fourteen (14) days
after the expiration or termination of this Lease, if Lessor elects to apply the
Security Deposit only to unpaid Rent, and otherwise within thirty (30) days
after the Premises have been vacated pursuant to Paragraph 7.4(c) below, Lessor
shall return that portion of the Security Deposit not used or applied by Lessor.
No part of the Security Deposit shall be considered to be held in trust, to bear
interest or to be prepayment for any monies to be paid by Lessee under this
Lease. 6. Use.
6.1 Use. Lessee shall use and occupy the Premises only for the Agreed Use,
or any other legal use which is reasonably comparable thereto, and for no other
purpose. Lessee shall not use or permit the use of the Premises in a manner that
is unlawful, creates damage, waste or a nuisance, or that disturbs owners and/or
occupants of, or causes damage to neighboring properties. Lessor shall not
unreasonably withhold
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or delay its consent to any written request for a modification of the Agreed
Use, so long as the same will not impair the structural integrity of the
improvements on the Premises or the mechanical or electrical systems therein, is
not significantly more burdensome to the Premises. If Lessor elects to withhold
consent, Lessor shall within ten (10) business days after such request give
written notification of same, which notice shall include an explanation of
Lessor's objections to the change in use.
6.2 Hazardous Substances. See Addendum, Sec. 6.2.
(e) Lessor Indemnification. Lessor and its successors and assigns
shall indemnify, defend, reimburse and hold Lessee, its employees and lenders,
harmless from and against any and all environmental damages which existed as a
result of Hazardous Substances on the Premises prior to the Start Date or which
are caused by the gross negligence, or intentional acts of Lessor, its agents or
employees. Lessor's obligations, as and when required by the Applicable
Requirements, shall include, but not be limited to, the cost of investigation,
removal, remediation, restoration and/or abatement, and shall survive the
expiration or termination of this Lease.
(f) Investigations and Remediations. Lessor shall retain the
responsibility and pay for any investigations or remediation measures required
by governmental entities having jurisdiction with respect to the existence of
Hazardous Substances on the Premises prior to the Start Date. Lessee shall
cooperate fully in any such activities at the request of Lessor, including
allowing Lessor and Lessor's agents to have reasonable access to the Premises at
reasonable times in order to carry out Lessor's investigative and remedial
responsibilities.
(g) [No text.]
6.3 Lessee's Compliance with Applicable Requirements. Except as otherwise
provided in this Lease, Lessee, shall, at Lessee's sole expense, fully,
diligently and in a timely manner, materially comply with all Applicable
Requirements, the requirements of any applicable fire insurance underwriter or
rating bureau, and the recommendations of Lessor's engineers and/or consultants
which relate in any manner to the Premises, without regard to whether said
requirements are now in effect or become effective after the Start Date. Lessee
shall, within ten (10) days after receipt of Lessor's written request, provide
Lessor with copies of all permits and other documents, and other information
evidencing Lessee's compliance with any Applicable Requirements specified by
Lessor, and shall immediately upon receipt, notify Lessor in writing (with
copies of any documents involved) of any threatened or actual claim, notice,
citation, warning, complaint or report pertaining to or involving the failure of
Lessee or the Premises to comply with any Applicable Requirements.
6.4 Inspection; Compliance. See Addendum, Sec. 6.4.
7. Maintenance; Repairs, Utility Installations; Trade Fixtures and
Alterations.
7.1 Lessee's Obligations.
(a) In General. Subject to the provisions of Paragraph 6.2
(Hazardous Substances), 2.3 (Compliance), 6.3 (Lessee's Compliance with
Applicable Requirements), 7.2 (Lessor's Obligations), 9 (Damage or Destruction),
and 14 (Condemnation), Lessee shall, at Lessee's sole expense, keep
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the Premises, Utility Installations, and Alterations in good order, condition
and repair (whether or not the portion of the Premises requiring repairs, or the
means of repairing the same, are reasonably or readily accessible to Lessee, and
whether or not the need for such repairs occurs as a result of Lessee's use, any
prior use, the elements or the age of such portion of the Premises), including,
but not limited to, all equipment or facilities, such as plumbing, HVAC,
electrical, lighting facilities, boilers, pressure vessels, fire protection
system, fixtures, walls (interior and exterior), foundations, ceilings, roofs,
floors, windows, doors, plate glass, skylights, landscaping, driveways, parking
lots, fences, retaining walls, signs, sidewalks and parkways located in the
Premises. Lessee, in keeping the Premises in good order, condition and repair,
shall exercise and perform good maintenance practices, specifically including
the procurement and maintenance of the service contracts required by Paragraph
7.1(b) below. Lessee's obligations shall include restorations, replacements or
renewals when necessary to keep the Premises and all improvements thereon or a
part thereof in good order, condition and state of repair. Lessee shall, during
the term of this Lease, keep the exterior appearance of the Building in a
first-class condition consistent with the exterior appearance of other similar
facilities of comparable age and size in the vicinity, including, when
necessary, the exterior repainting of the Building.
(b) Service Contracts. Lessee shall, at Lessee's sole expense, procure
and maintain contracts, with copies to Lessor, in customary form and substance
for, and with contractors specializing and experienced in the maintenance of the
following equipment and improvements, ("Basic Elements"), if any, as and when
installed on the Premises: (i) HVAC equipment, (ii) boiler and pressure vessels,
(iii) fire protection systems, (iv) landscaping and irrigation systems, (v) roof
covering and drains, (vii) clarifiers and (viii) any other equipment, if
reasonably required by Lessor.
(c) Replacement. Subject to Lessee's indemnification of Lessor as set
forth in Paragraph 8.7 below, and without relieving Lessee of liability
resulting from Lessee's failure to exercise and perform good maintenance
practices, if the Basic Elements described in Paragraph 7.1(b) cannot be
repaired other than at a cost which is in excess of 50 % of the cost of
replacing such Basic Elements, then such Basic Elements shall be replaced by
Lessor, and the cost thereof shall be prorated between the Parties and Lessee
shall only be obligated to pay, each month during the remainder of the term of
this Lease, on the date on which Base Rent is due, an amount equal to the
product of multiplying the cost of such replacement by a fraction, the numerator
of which is one, and the denominator of which is the number of months of the
useful life of such replacement as such useful life is specified pursuant to
Federal income tax regulations or guidelines for depreciation thereof (including
interest on the unamortized balance as is then commercially reasonable in the
judgment of Lessor's accountants), with Lessee reserving the right to prepay its
obligation at any time.
7.2 Lessor's Obligations. Subject to the provisions of Paragraphs 7.1(c)
(Replacement), 6.2 (Hazardous Substances), 2.3 (Compliance), 9 (Damage or
Destruction) and 14 (Condemnation), it is intended by the Parties hereto that
Lessor have no obligation, in any manner whatsoever, to repair and maintain the
Premises, or the equipment therein, all of which obligations are intended to be
that of the Lessee. It is the intention of the Parties that the terms of this
Lease govern the respective obligations of the Parties as to maintenance and
repair of the Premises, and they expressly waive the benefit of any statute now
or hereafter in effect to the extent it is inconsistent with the terms of this
Lease.
7.3 Utility Installations; Trade Fixtures; Alterations.
(a) Definitions; Consent Required. The term "Utility Installations"
refers to all floor and window coverings, air lines, power panels, electrical
distribution, security and fire protection systems, communication systems,
lighting fixtures, HVAC equipment, plumbing, and fencing in or on the Premises.
The term "Trade Fixtures" shall mean Lessee's machinery and equipment that can
be removed without doing material damage to the Premises. The term "Alterations"
shall mean any modification of the improvements, other than Utility
Installations or Trade Fixtures, whether by addition or deletion. "Lessee Owned
Alterations and/or Utility Installations" are defined as Alterations and/or
Utility Installations made by Lessee that are not yet owned by Lessor pursuant
to Paragraph 7.4(a). Lessee shall not make any Alterations or Utility
Installations to the Premises without Lessor's prior written consent. Lessee
may, however, make non-structural Utility Installations to the interior of the
Premises (excluding the roof) without such consent but upon notice to Lessor, as
long as they are not visible from the outside, do not involve puncturing,
relocating or removing the roof or any existing exterior walls, and the
cumulative cost thereof during this Lease as extended does not exceed
$100,000.00 in any one year.
(b) Consent. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. Consent shall be deemed
conditioned upon Lessee's: (i) acquiring all applicable governmental permits,
(ii) furnishing Lessor with copies of both the permits and the plans and
specifications prior to commencement of the work, and (iii) compliance with all
conditions of said permits and other Applicable Requirements in a prompt and
expeditious manner. Any Alterations or Utility Installations shall be performed
in a workmanlike manner with good and sufficient materials. Lessee shall
promptly upon completion furnish Lessor with as-built plans and specifications.
For work which costs an amount equal to the greater of one month's Base Rent, or
$10,000, Lessor may condition its consent upon Lessee providing a lien and
completion bond in an amount equal to one and one-half times the estimated cost
of such Alteration or Utility Installation and/or upon Lessee's posting an
additional Security Deposit with Lessor.
(c) Indemnification. Lessee shall pay, when due, all claims for labor
or materials furnished or alleged to have been furnished to or for Lessee at or
for use on the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on or about the Premises, and Lessor shall have the right to post
notices of non-responsibility. If Lessee shall contest the validity of any such
lien, claim or demand, then Lessee shall, at its sole expense defend and protect
itself, Lessor and the Premises against the same and shall pay and satisfy any
such adverse judgment that may be rendered thereon before the enforcement
thereof. If Lessor shall require, Lessee shall furnish a surety bond in an
amount equal to one and one-half times the amount of such contested lien, claim
or demand, indemnifying Lessor against liability for the same. If Lessor elects
to participate in any such action, Lessee shall pay Lessor's attorneys' fees and
costs.
7.4 Ownership; Removal; Surrender; and Restoration.
(a) Ownership. Alterations and Utility Installations made by Lessee
shall be the property of Lessee, but considered a part of the Premises. Lessee
Owned Alterations and Utility Installations shall, at the expiration or
termination of this Lease, become the property of Lessor and be surrendered by
Lessee with the Premises. See Addendum, Section 50.4.3.
(b) Removal. [No text.]
(c) Surrender/Restoration. Lessee shall surrender the Premises by the
Expiration Date or any earlier termination date, with all of the improvements,
parts and surfaces thereof broom clean and free of debris, and in good operating
order, condition and state of repair, ordinary wear and tear excepted. "Ordinary
wear and tear" shall not include any damage or deterioration that would gave
been prevented by good maintenance practice. Lessee shall repair any damage
occasioned by the installation, maintenance or removal of Trade Fixtures,
furnishings, and equipment installed by or for Lessee, and the removal,
replacement, or remediation of any soil, material or groundwater contaminated by
Lessee. Trade Fixtures shall remain the property of Lessee and may, at Lessor's
election, be removed by Lessee. See Addendum, Section 50.4.3. The failure by
Lessee to timely vacate the Premises pursuant to this Paragraph 7.4(c) without
the express written consent of Lessor shall constitute a holdover under the
provisions of Paragraph 26 below. 8. Insurance; Indemnity.
8.1 Payment For Insurance. Lessee shall pay for all insurance required
under Paragraph 8 except to the extent of the cost attributable to liability
insurance carried by Lessor under Paragraph 8.2(b) in excess of $2,000,000 per
occurrence. Premiums for policy periods commencing prior to or extending beyond
the Lease term shall be prorated to correspond to the Lease term. Payment shall
be made by Lessee to Lessor within thirty (30) days following receipt of an
invoice.
8.2 Liability Insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in force a
Commercial General Liability Policy of Insurance protecting Lessee
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and Lessor against claims for bodily injury, personal injury and property damage
based upon or arising out of the ownership, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto. Such insurance shall be on an
occurrence bases providing single limit coverage in an amount not less than
$2,000,000 per occurrence with an "Additional Insured-Managers or Lessors of
Premises Endorsement" and contain the "Amendment of the Pollution Exclusion
Endorsement" for damage caused by heat, smoke or fumes from a hostile fire. The
Policy shall not contain any intra-insured exclusions as between insured persons
or organizations, but shall include coverage for liability assumed under this
Lease as an "insured contract" for the performance of Lessee's indemnity
obligations under this Lease. The limits of said insurance shall not, however,
limit the liability of Lessee nor relieve Lessee of any obligation hereunder.
All insurance carried by Lessee shall be primary to and not contributory with
any similar insurance carried by Lessor, whose insurance shall be considered
excess insurance only.
(b) Carried by Lessor. Lessor shall maintain liability insurance as
described in Paragraph 8.2(a), in addition to, and not in lieu of, the insurance
required to be maintained by Lessee. Lessee shall not be named as an additional
insured therein.
8.3 Property Insurance - Building, Improvements and Rental Value.
(a) Building and Improvements. The Insuring Party shall obtain and
keep in force a policy or policies in the name of Lessor, with loss payable to
Lessor and to any Lender insuring loss or damage to the Premises. The amount of
such insurance shall be equal to the full replacement cost of the Premises, as
the same shall exist from time to time, or the amount required by any Lenders,
but in no event more than the commercially reasonable and available insurable
value thereof. If Lessor is the Insuring Party, however, Lessee Owned
Alterations and Utility Installations, Trade Fixtures, and Lessee's personal
property shall be insured by Lessee under Paragraph 8.4 rather than by Lessor.
If the coverage is available and commercially appropriate, such policy or
policies shall insure against all risks of direct physical loss or damage
(except the perils of flood and/or earthquake unless required by a Lender),
including coverage for debris removal and the enforcement of any Applicable
Requirements requiring the upgrading, demolition, reconstruction or replacement
of any portion of the Premises as the result of a covered loss. Said policy or
policies shall also contain an agreed valuation provision in lieu of any
coinsurance clause, waiver of subrogation, and inflation guard protection
causing an increase in the annual property insurance coverage amount by a factor
of not less than the adjusted U.S. Department of Labor Consumer Price Index for
All Urban Consumers for the city nearest to where the Premises are located. If
such insurance coverage has a deductible clause, the deductible amount shall not
exceed $10,000.00 per occurrence, and Lessee shall be liable for such deductible
amount in the event of an Insured Loss. See Addendum, Sec. 8.3.
(b) Rental Value. The Insuring Party shall obtain and keep in force a
policy or policies in the name of Lessor with loss payable to Lessor and any
Lender, insuring the loss of the full Rent for one (1) year. Said insurance
shall provide that in the event the Lease is terminated by reason of an insured
loss, the period of indemnity for such coverage shall be extended beyond the
date of the completion of repairs or replacement of the Premises, to provide for
one full year's loss of Rent from the date of any such loss. Said insurance
shall contain an agreed valuation provision in lieu of any coinsurance clause,
and the amount of coverage shall be adjusted annually to reflect the projected
Rent otherwise payable by Lessee, for the next twelve (12) month period. Lessee
shall be liable for any deductible amount in the event of such loss.
(c) Adjacent Premises. If the Premises are part of a larger building,
or of a group of buildings owned by Lessor which are adjacent to the Premises,
the Lessee shall pay for any increase in the premiums for the property insurance
of such building or buildings if said increase is caused by Lessee's acts,
omissions, use or occupancy of the Premises.
8.4 Lessee's Property/Business Interruption Insurance.
(a) Property Damage. Lessee shall obtain and maintain insurance
coverage on all of Lessee's personal property, Trade Fixtures, and Lessee Owned
Alterations and Utility Installations. Such Insurance shall be full replacement
cost coverage with a deductible of not to exceed $10,000.00 per occurrence. The
proceeds from any such insurance shall be used by Lessee for the replacement of
personal property, Trade Fixtures and Lessee Owned Alterations and Utility
Installations. Lessee shall provide Lessor with written evidence that such
insurance is in force.
(b) Business Interruption. [No text.]
(c) No Representation of Adequate Coverage. Lessor makes no
representation that the limits or forms of coverage of insurance specified
herein are adequate to cover Lessee's property, business operations or
obligations under this Lease.
8.5 Insurance Policies. Insurance required herein shall be by companies
duly licensed or admitted to transact business in the state where the Premises
are located, and maintaining during the policy term a "General Policyholders
Rating" of at least B+, V, as set forth in the most current issue of "Best's
Insurance Guide", or such other rating as may be required by a Lender. Lessee
shall not do or permit to be done anything which invalidates the required
insurance policies. Lessee shall, prior to the Start Date, deliver to Lessor
certified copies of policies of such insurance or certificates evidencing the
existence and amounts of the required insurance. No such policy shall be
cancelable or subject to modification except after thirty (30) days prior
written notice to Lessor. Lessee shall, at least thirty (30) days prior to the
expiration of such policies, furnish Lessor with evidence of renewals or
"insurance binders" evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be payable
by Lessee to Lessor upon demand. Such policies shall be for a term of at least
one year, or the length of the remaining term of this Lease, whichever is less.
If either Party shall fail to procure and maintain the insurance required to be
carried by it, the other Party may, but shall not be required to, procure and
maintain the same. See Addendum Sec. 8.5.
8.6 Waiver of Subrogation. See Addendum.
8.7 Indemnity. Except for Lessor's negligence, Lessee shall indemnify,
protect, defend and hold harmless the Premises, Lessor and its agents, Lessor's
master or ground lessor, partners and Lenders, from and against any and all
claims, loss of rents and/or damages, liens, judgments, penalties, attorneys'
and consultants' fees, expenses and/or liabilities arising out of, involving, or
in connection with, the use and/or occupancy of the Premises by Lessee. If any
action or proceeding is brought against Lessor by reason of any of the foregoing
matters, Lessee shall upon notice defend the same at Lessee's expense by counsel
reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such
defense. Lessor need not have first paid any such claim in order to be defended
or indemnified.
8.8 Exemption of Lessor from Liability. [No text.]
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall mean damage or destruction to the
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations, which can reasonably be repaired in six (6) months or less from
the date of the damage or destruction. Lessor shall notify Lessee in writing
within thirty (30) days from the date of the damage or destruction as to whether
or not the damage is Partial or Total.
(b) "Premises Total Destruction" shall mean damage or destruction to
the Premises, other than Lessee Owned Alterations and Utility Installations,
which cannot reasonably be repaired in six (6) months or less from the date of
the damage or destruction. Lessor shall notify Lessee in writing within thirty
(30) days from the date of the damage or destruction as to whether or not the
damage is Partial or Total.
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(c) "Insured Loss" shall mean damage or destruction to improvements on
the Premises, other than Lessee Owned Alterations and Utility Installations and
Trade Fixtures, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a), irrespective of any deductible amounts
of coverage limits involved.
(d) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of Applicable Requirements, and without
deduction for depreciation.
(e) "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition involving the presence of, or a combination by,
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 Partial Damage - Insured Loss. If a Premises Partial Damage that is an
Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage
(but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect; provided, however, that Lessee shall, at Lessor's
election, make the repair of any damage or destruction the total cost to repair
of which is $10,000 or less, and, in such event, Lessor shall make any
applicable insurance proceeds available to Lessee on a reasonable bases for that
purpose. Notwithstanding the foregoing, if the required insurance was not in
force or the insurance proceeds are not sufficient to effect such repair, the
Insuring Party shall promptly contribute the shortage in proceeds (except as to
the deductible which is Lessee's responsibility) as and when required to
complete said repairs. In the event, however, such shortage was due to the fact
that, by reason of the unique nature of the improvements, full replacement cost
insurance coverage was not commercially reasonable and available, Lessor shall
have no obligation to pay for the shortage in insurance proceeds or to fully
restore the unique aspects of the Premises unless Lessee provides Lessor with
the funds to cover same, or adequate assurance thereof, within ten (10) days
following receipt of written notice of such shortage and request therefor. If
Lessor receives said funds or adequate assurance thereof within said ten (10)
day period, the party responsible for making the repairs shall complete them as
soon as reasonably possible and this Lease shall remain in full force and
effect. If such funds or assurance are not received, Lessor may nevertheless
elect by written notice to Lessee within ten (10) days thereafter to: (i) make
such restoration and repair as is commercially reasonable with Lessor paying any
shortage in proceeds, in which case this Lease shall remain in full force and
effect, or have this Lease terminate thirty (30) days thereafter. Lessee shall
not be entitled to reimbursement of any funds contributed by Lessee to repair
any such damage or destruction. Premises Partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3, notwithstanding that there may be
some insurance coverage, but the net proceeds of any such insurance shall be
made available for the repairs if made by either Party.
9.3 Partial Damage - Uninsured Loss. See Addendum, Section 9.3.
9.4 Total Destruction. Notwithstanding any other provision hereof, if a
Premises Total Destruction occurs, this Lease shall terminate on the date of
such Destruction. If the damage or destruction was caused by the gross
negligence or willful misconduct of Lessee, Lessor shall have the right to
recover Lessor's damages from Lessee except as provided in the Addendum, Sec.
8.6.
9.5 Damage Near End of Term. If at any time during the last six (6) months
of this Lease there is damage for which the cost to repair exceeds one (1)
month's Base Rent, whether or not an Insured Loss, Lessor may terminate this
Lease effective sixty (60) days following the date of occurrence of such damage
by giving a written termination notice to Lessee within thirty (30) days after
the date of occurrence of such damage. Notwithstanding the foregoing, if Lessee
at that time has an exercisable option to extend this Lease or to purchase the
Premises, then Lessee may preserve this Lease by, (a) exercising such option and
(b) providing Lessor with any shortage in insurance proceeds (or adequate
assurance thereof) needed to make the repairs on or before the earlier of (i)
the date which is ten days after Lessee's receipt of Lessor's written notice
purporting to terminate this Lease, or (ii) the day prior to the date upon with
such option expires. If Lessee duly exercised such option during such period and
provides Lessor with funds (or adequate assurance thereof) to cover any shortage
in insurance proceeds, Lessor shall, at Lessor's commercially reasonable
expense, repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option and
provide such funds or assurance during such period, then this Lease shall
terminate on the date specified in the termination notice and Lessee's option
shall be extinguished.
9.6 Abatement of Rent; Lessee's Remedies.
(a) Abatement. In the event of Premises Partial Damage or Premises
Total Destruction or a Hazardous Substance Condition for which Lessee is not
responsible under this Lease, the Rent payable by Lessee for the period required
for the repair, remediation or restoration of such damage shall be abated in
proportion to the degree to which Lessee's use of the Premises is impaired, but
not to exceed the proceeds received from the Rental Value insurance. All other
obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall
have no liability for any such damage, destruction, remediation, repair or
restoration except as provided herein.
(b) Remedies. If Lessor shall be obligated to repair or restore the
Premises and does not commence, in a substantial and meaningful way, such repair
or restoration within ninety (90) days after such obligation shall accrue,
Lessee may, at any time prior to the commencement of such repair or restoration,
give written notice to Lessor and to any Lenders of which Lessee has actual
notice, of Lessee's election to terminate this Lease on a date not less than
sixty (60) days following the giving of such notice. If Lessee gives such notice
and such repair or restoration is not commenced within thirty (30) days
thereafter, this Lease shall terminate as of the date specified in said notice.
If the repair or restoration is commenced within said thirty (30) days, this
Lease shall continue in full force and effect. "Commence" shall mean either the
unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever first occurs.
9.7 Termination-Advance Payments. Upon termination of this Lease pursuant
to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be made
concerning advance Base Rent and any other advance payments made by Lessee to
Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's Security
Deposit as has not been, or is not then required to be, used by Lessor.
9.8 Waive Statutes. Lessor and Lessee agree that the terms of this Lease
shall govern the effect of any damage to or destruction of the Premises with
respect to the termination of this Lease and hereby waive the provisions of any
present or future statute to the extent inconsistent herewith.
10. Real Property Taxes.
10.1 Definition of "Real Property Taxes." As used herein, the term "Real
Property Taxes" shall include any form of assessment; real estate, general,
special, ordinary or extraordinary, or rental levy or tax (other than
inheritance, personal income or estate taxes); improvement bond; and/or license
fee imposed upon or levied against any legal or equitable interest of Lessor in
the Premises, Lessor's right to other income therefrom, and/or Lessor's business
of leasing, by any authority having the direct or indirect power to tax and
where the funds are generated with reference to the Building address and where
the proceeds so generated are to be applied by the city, county or other local
taxing authority of a jurisdiction within which the Premises are located. The
term "Real Property Taxes" shall also include any tax, fee, levy, assessment or
charge, or any increase therein, imposed by reason of events occurring during
the term of this Lease, including but not limited to, a change in the ownership
of the Premises.
10.2
(a) Payment of Taxes. Lessee shall pay the Real Property Taxes
applicable to the Premises commencing on the Rent Commencement Date and
continuing through the term of this Lease. Subject to Paragraph 10.2(b), all
such payments shall be made at least ten (10) days prior to any delinquency
date. Lessee shall promptly furnish Lessor with satisfactory evidence that such
taxes have been paid. If any such taxes shall cover any period of time prior to
or after the expiration or
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termination of this Lease, Lessee's share of such taxes shall be prorated to
cover only that portion of the tax bill applicable to the period during which
rent is due and Lessor shall reimburse Lessee for any overpayment. If Lessee
shall fail to pay any required Real Property Taxes, Lessor shall have the right
to pay the same, and Lessee shall reimburse Lessor therefor upon demand.
(b) Advance Payment. In the event Lessee incurs a late charge on any
Rent payment, Lessor may, at Lessor's option, estimate the current Real Property
Taxes, and require that such taxes be paid in advance to Lessor by Lessee,
either: (I) in a lump sum amount equal to the installment due, at least twenty
(20) days prior to the applicable delinquency date, or (ii) monthly in advance
with the payment of the Base Rent. If Lessor elects to require payment monthly
in advance, the monthly payment shall be an amount equal to the amount of the
estimated installment of taxes divided by the number of months remaining before
the month in which said installment becomes delinquent. When the actual amount
of the applicable tax bill is known, the amount of such equal monthly advance
payments shall be adjusted as required to provide the funds needed to pay the
applicable taxes. If the amount collected by Lessor is insufficient to pay such
Real Property Taxes when due, Lessee shall pay Lessor, upon demand, such
additional sums as are necessary to pay such obligations. All moneys paid to
Lessor under this Paragraph may be intermingled with other moneys of Lessor and
shall not bear interest. In the event of a Breach by Lessee in the performance
of its obligations under this Lease, then any balance of funds paid to Lessor
under the provisions of this Paragraph may at the option of Lessor, be treated
as an additional Security Deposit. See Addendum.
10.3 Joint Assessment. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be conclusively determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available.
10.4 Personal Property Taxes. Lessee shall pay, prior to delinquency, all
taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee. When possible, Lessee shall cause such property to be assessed and
billed separately from the real property of Lessor. If any of Lessee's said
personal property shall be assessed with Lessor's real property, Lessee shall
pay Lessor the taxes attributable to Lessee's property within ten (10) days
after receipt of a written statement. 11. Utilities. Commencing on the
Commencement Date, Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered. 12. Assignment and
Subletting.
12.1 Lessor's Consent Required.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or encumber (collectively, "assign or assignment") or sublet
all or any part of Lessee's interest in this Lease or in the Premises without
Lessor's prior written consent which shall not be unreasonably withheld.
(b) A change in the control of Lessee shall constitute an assignment
requiring consent. The transfer, on a cumulative bases, of twenty-five percent
(25%) or more of the voting control of Lessee shall constitute a change in
control for this purpose.
(c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
transfer, leveraged buy-out or otherwise), whether or not a formal assignment or
hypothecation of this Lease or Lessee's assets occurs, which results or will
result in a reduction of the Net Worth of Lessee by an amount greater than
twenty-five percent (25%) of such Net Worth as it was represented at the time of
the execution of this Lease or at the time of the most recent assignment to
which Lessor has consented, or as it exists immediately prior to said
transaction or transactions constituting such reduction, whichever was or is
greater, shall be considered an assignment of this Lease to which Lessor may
withhold its consent. "Net Worth of Lessee" shall mean the net worth of Lessee
(excluding any guarantors) established under generally accepted accounting
principles.
(d) An assignment or subletting without consent shall, at Lessor's
option, be a Default curable after notice per Paragraph 13.1(c), or a noncurable
Breach without the necessity of any notice and grace period. If Lessor elects to
treat such unapproved assignment or subletting as a noncurable Breach, Lessor
may terminate this Lease.
(e) Lessee's remedy for any breach of Paragraph 12.1 by Lessor shall
be limited to compensatory damages and/or injunctive relief.
12.2 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, any assignment or subletting shall
not: (i) be effective without the express written assumption by such assignee or
sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of
any obligations hereunder, or (iii) alter the primary liability of Lessee for
the payment of Rent or for the performance of any other obligations to be
performed by Lessee.
(b) Lessor may accept Rent or performance of Lessee's obligations from
any person other than Lessee pending approval or disapproval of an assignment.
Neither a delay in the approval or disapproval of such assignment nor the
acceptance of Rent or performance shall constitute a waiver or estoppel of
Lessor's right to exercise its remedies for Lessee's Default or Breach.
(c) Lessor's consent to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting.
(d) In the event of any Default or Breach by Lessee, Lessor may
proceed directly against Lessee, any Guarantors or anyone else responsible for
the performance of Lessee's obligations under this Lease, including any assignee
or sublessee, without first exhausting Lessor's remedies against any other
person or entity responsible therefore to Lessor, or any security held by
Lessor.
(e) Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, Lessee agrees to provide Lessor
with such other or additional information and/or documentation as may be
reasonably requested.
(f) Any assignee of, or sublessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed to have
assumed and agreed to conform and comply with each and every term, covenant,
condition and obligation herein to be observed or performed by Lessee during the
term of said assignment or sublease, other than such obligations as are contrary
to or inconsistent with provisions of an assignment or sublease to which Lessor
has specifically consented to in writing.
12.3 Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all Rent payable on any sublease, and Lessor may collect such Rent
and apply same toward Lessee's obligations under this Lease; provided, however,
that until a Breach shall occur in the performance of Lessee's obligations,
Lessee may collect said Rent. Lessor shall not, by reason of the foregoing or
any assignment of such sublease, nor by reason of the collection of Rent, be
deemed liable to the sublessee for any failure of Lessee to perform and comply
with any of Lessee's obligations to such sublessee. Lessee hereby irrevocably
authorizes and directs any such sublessee, upon receipt of a written notice from
Lessor stating that a Breach exists in the performance of Lessee's obligations
under this Lease, to pay to Lessor all Rent due and to become due under the
sublease. Sublessee shall rely upon any such notice from Lessor and shall pay
all Rents to Lessor without any obligation or right to inquire as to whether
such Breach exists, notwithstanding any claim from Lessee to the contrary.
(b) In the event of a Breach by Lessee, Lessor may, at its option,
require sublessee to attorn to Lessor, in which event Lessor shall undertake the
obligations of the sublessor under such sublease from the time of the exercise
of said option to the expiration of such sublease; provided, however, Lessor
shall not be liable for any prepaid rents or security deposit paid by such
sublessee to such sublessor or for any prior Defaults or Breaches of such
sublessor.
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(c) Any matter requiring the consent of the sublessor under a sublease
shall also require the consent of Lessor.
(d) No sublessee shall further assign or sublet all or any part of the
Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to cure the Default of Lessee
within the grace period, if any, specified in such notice. The sublessee shall
have a right of reimbursement and offset from and against Lessee for any such
Defaults cured by the sublessee.
13. Default; Breach; Remedies.
13.1 Default; Breach. A "Default" is defined as a failure by the Lessee to
comply with or perform any of the terms, covenants, conditions or rules under
this Lease. A "Breach" is defined as the occurrence of one or more of the
following Defaults, and the failure of Lessee to cure such Default within any
applicable grace period:
(a) The abandonment of the Premises; or the vacating of the Premises
without providing a commercially reasonable level of security, or where the
coverage of the property insurance described in Paragraph 8.3 is jeopardized as
a result thereof, or without providing reasonable assurances to minimize
potential vandalism.
(b) The failure of Lessee to make any payment of Rent or any other
monetary payment required to be made by Lessee hereunder, whether to Lessor or
to a third party, when due, to provide reasonable evidence of insurance or
surety bond, or to fulfill any obligation under this Lease which endangers or
threatens life or property, where such failure continues for a period of three
(3) business days following written notice to Lessee.
(c) The failure by Lessee to provide (i) reasonable written evidence
of compliance with Applicable Requirements, (ii) the service contracts, (iii)
the rescission of an unauthorized assignment or subletting, (iv) a Tenancy
Statement, (v) a requested subordination, (vi) evidence concerning any guaranty
and/or Guarantor, (vii) any document requested under Paragraph 42 (easements),
or (viii) any other documentation or information which Lessor may reasonably
require of Lessee under the terms of this Lease, where any such failure
continues for a period of ten (10) days following written notice to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
other than those described in subparagraphs 13.1(a), (b) or (c), above, where
such Default continues for a period of thirty (30) days after written notice;
provided, however, that if the nature of Lessee's Default is such that more than
thirty (30) days are reasonably required for its cure, then it shall not be
deemed to be a Breach if Lessee commences such cure within said thirty (30) day
period and thereafter diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making of
any general arrangement or assignment for the benefit of creditors; (ii)
becoming a "debtor" as defined in 11 U.S.C.ss. 101 or any successor statute
thereto (unless, in the case of a petition filed against Lessee, the same is
dismissed within sixty (60) days); (iii) the appointment of a trustee or
receiver to take possession of substantially all of Lessee's assets located at
the Premises or of Lessee's interest in this Lease, where possession is not
restored to Lessee within thirty (30) days; or (iv) the attachment, execution or
other judicial seizure of substantially all of Lessee's assets located at the
Premises or of Lessee's interest in this Lease, where such seizure is not
discharged within thirty (30) days; provided, however, in the event that any
provision of this subparagraph (e) is contrary to any applicable law, such
provision shall be of no force or effect, and not affect the validity of the
remaining provisions.
(f) The discovery that any financial statement of Lessee or of any
Guarantor given to Lessor was materially false.
(g) [No text.]
13.2 Remedies. If Lessee fails to perform any of its affirmative duties or
obligations, within ten (10) days after written notice (or in case of an
emergency, without notice), Lessor may, at its option, perform such duty or
obligation on Lessee's behalf, including but not limited to the obtaining of
reasonably required bonds, insurance policies, or governmental licenses, permits
or approvals. The costs and expenses of any such performance by Lessor shall be
due and payable by Lessee upon receipt of invoice therefor. If any check given
to Lessor by Lessee shall not be honored by the bank upon which it is drawn,
Lessor, at its option, may require all future payments to be made by Lessee to
be by cashier's check. In the event of a Breach, Lessor may, with or without
further notice or demand, and without limiting Lessor in the exercise of any
right or remedy which Lessor may have by reason of such Breach:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession to Lessor. In such event Lessor shall be
entitled to recover from Lessee: (i) the unpaid Rent which had been earned at
the time of termination; (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that the Lessee proves
could have been reasonably avoided; (iii) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by provision (iii) of the immediately
preceding sentence shall be computed by discounting such amount at the discount
rate of the Federal Reserve Bank of the District within which the Premises are
located at the time of award plus one percent (1%). Efforts by Lessor to
mitigate damages caused by Lessee's Breach of this Lease shall not waive
Lessor's right to recover damages under Paragraph 12. If termination of this
Lease is obtained through the provisional remedy of unlawful detainer, Lessor
shall have the right to recover in such proceeding any unpaid Rent and damages
as are recoverable therein, or Lessor may reserve the right to recover all or
any part thereof in a separate suit. If a notice and grace period required under
Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and the
failure of Lessee to cure the Default within the greater of the two such grace
periods shall constitute both an unlawful detainer and a Breach of this Lease
entitling Lessor to the remedies provided for in this Lease and/or by said
statue.
(b) Continue the Lease and Lessee's right to possession and recover
the Rent as it becomes due, in which event Lessee may sublet or assign, subject
only to reasonable limitations. Acts of maintenance, efforts to relet, and/or
the appointment of a receiver to protect the Lessor's interest, shall not
constitute a termination of the Lessee's right to possession. See Addendum,
Section 13.2.
(c) Pursue any other remedy now or hereafter available under the laws
or judicial decisions of the state wherein the Premises are located. The
expiration or termination of this Lease and/or the termination of Lessee's right
to possession shall not relieve Lessee from liability under any indemnity
provisions of this Lease as to matters occurring or accruing during the term
hereof or by reason of Lessee's occupancy of the Premises.
13.3 Inducement Recapture. Any agreement for free or abated rent or other
charges, or for the giving or paying by Lessor to or for Lessee of any cash or
other bonus, inducement or consideration for Lessee's entering into this Lease,
all of which concessions are hereinafter referred to as "Inducement Provisions,"
shall be deemed conditioned upon Lessee's full and faithful performance of all
of the terms, covenants and conditions of this Lease. Upon Breach of this Lease
by Lessee, any such Inducement Provision shall automatically be deemed deleted
from this Lease and of no further force or effect, and any rent, other charge,
bonus, inducement or consideration theretofore abated, given or paid by Lessor
under such an Inducement Provision shall be immediately due and payable by
Lessee to Lessor, notwithstanding any subsequent cure of said Breach by Lessee.
The acceptance by Lessor of rent or the cure of the Breach which initiated the
operation of this paragraph shall not
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be deemed a waiver by Lessor of the provisions of this paragraph unless
specifically so stated in writing by Lessor at the time of such acceptance.
13.4 Late Charges. See Addendum, Section 13.4.
13.5 Interest. Any monetary payment due Lessor hereunder, other than late
charges, not received by Lessor within thirty (30) days following the date on
which it was due, shall bear interest from the thirty-first (31st) day after it
was due. The interest ("interest") charged shall be equal to the prime rate
charged by the largest state chartered bank in the state in which the Premises
are located plus 4%, but shall not exceed the maximum rate allowed by law.
Interest is payable in addition to the potential late charge provided for in
Paragraph 13.4.
13.6 Breach by Lessor.
(a) Notice of Breach. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and any Lender whose name and address shall have been furnished Lessee in
writing for such purpose, of written notice specifying wherein such obligation
of Lessor has not been performed; provided, however, that if the nature of
Lessor's obligation is such that more than thirty (30) days are reasonably
required for its performance, then Lessor shall not be in breach if performance
is commenced within such thirty (30) day period and thereafter diligently
pursued to completion.
(b) Performance by Lessee on Behalf of Lessor. In the event that
neither Lessor nor Lender cures said breach within thirty (30) days after
receipt of said notice, or if having commenced said cure they do not diligently
pursue it to completion, then Lessee may elect to cure said breach at Lessee's
expense and offset from Rent an amount equal to the greater of one month's Base
Rent or the Security Deposit, and to pay an excess of such expense under
protest, reserving Lessee's right to reimbursement from Lessor. Lessee shall
document the cost of said cure and supply said documentation to Lessor. 14.
Condemnation. If the Premises or any portion thereof are taken under the power
of eminent domain or sold under the threat of the exercise of said power
(collectively "Condemnation"), this Lease shall terminate as to the part taken
as of the date the condemning authority takes title or possession, whichever
first occurs. If more than ten percent (10%) of any building, or more than
twenty-five percent (25%) of the land area not occupied by any building, is
taken by Condemnation, Lessee may, at Lessee's option, to be exercised in
writing within ten (10) days after Lessor shall have given Lessee written notice
of such taking (or in the absence of such notice, within ten (10) days after the
condemning authority shall have taken possession) terminate this Lease as of the
date the condemning authority takes such possession. If Lessee does not
terminate this Lease in accordance with the foregoing, this Lease shall remain
in full force and effect as to the portion of the Premises remaining, except
that the Base Rent shall be reduced in proportion to the reduction in utility of
the Premises caused by such Condemnation. Condemnation awards and/or payments
shall be the property of Lessor, whether such award shall be made as
compensation for diminution in value of the leasehold, the value of the part
taken, or for severance damages; provided, however, that Lessee shall be
entitled to any compensation for Lessee's relocation expenses, loss of business
goodwill and/or Trade Fixtures, without regard to whether or not this Lease is
terminated pursuant to the provisions of this Paragraph. All Alterations and
Utility Installations made to the Premises by Lessee, for purposes of
Condemnation only, shall be considered the property of the Lessee and Lessee
shall be entitled to any and all compensation which is payable therefor. In the
event that this Lease is not terminated by reason of the Condemnation, Lessor
shall repair any damage to the Premises caused by such Condemnation. 15.
Broker's Fee.
15.1 Additional Commission. [No text.]
15.2 Assumption of Obligations. [No text.]
15.3 Representations and Indemnities of Broker Relationships. Lessee
and Lessor each represent and warrant to the other that it has had no dealings
with any person, firm, broker or finder (other than the Brokers, if any) in
connection with this Lease, and that no one other than said named Brokers is
entitled to any commission or finder's fee in connection herewith. Lessee and
Lessor do each hereby agree to indemnify, protect, defend and hold the other
harmless from and against liability for compensation or charges which may be
claimed by any such unnamed broker, finder or other similar party by reason of
any dealings or actions of the indemnifying Party, including any costs,
expenses, attorneys' fees reasonably incurred with respect thereto. See
Addendum, Sec. 15.3.
16. Tenancy Statement/Estoppel Certificate.
16.1 Each Party (as "Responding Party") shall within ten (10) days after
written notice from the other Party (the "Requesting Party") execute,
acknowledge and deliver to the Requesting Party an estoppel certificate in
writing, in form similar to the then most current "Tenancy Statement" form
published by the American Industrial Real Estate Association, plus such
additional information, confirmation and/or statements as may be reasonably
requested by the Requesting Party.
16.2 If Lessor desires to finance, refinance, or sell the Premises, or any
part thereof, Lessee and all Guarantors shall deliver to any potential lender or
purchaser designated by Lessor such financial statements as may be reasonably
required by such lender or purchaser, including but not limited to Lessee's
financial statements for the past three (3) years. All such financial statements
shall be received by Lessor and such lender or purchaser in confidence and shall
be used only for the purposes herein set forth. 17. Definition of Lessor. The
term "Lessor" as used herein shall mean the owner or owners at the time in
question of the fee title to the Premises, or, if this is a sublease, of the
Lessee's interest in the prior lease. In the event of a transfer of Lessor's
title or interest in the Premises or this Lease, Lessor shall deliver to the
transferee or assignee (in cash or by credit) any unused Security Deposit held
by Lessor. Except as provided in Paragraph 15, upon such transfer or assignment
and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be
relieved of all liability with respect to the obligations and/or covenants under
this Lease thereafter to be performed by the Lessor. Subject to the foregoing,
the obligations and/or covenants in this Lease to be performed by the Lessor
shall be binding only upon the Lessor as hereinabove defined. Notwithstanding
the above, the original Lessor under this Lease, and all subsequent holders of
the Lessor's interest in this Lease shall remain liable and responsible with
regard to the potential duties and liabilities of Lessor pertaining to Hazardous
Substances as outlined in Paragraph 6 above. 18. Severability. The invalidity of
any provision of this Lease, as determined by a court of competent jurisdiction,
shall in no way affect the validity of any other provision hereof.
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19. Days. Unless otherwise specifically indicated to the contrary, the word
"days" as used in this Lease shall mean and refer to calendar days.
20. Limitation on Liability. Except with respect to Lessor's fraud, gross
negligence or willful misconduct, the obligations of Lessor under this lease
shall not constitute personal obligations of Lessor, the individual partners of
Lessor or its or their individual partners, directors, officers or shareholders,
and Lessee shall look to the Premises, and to no other assets of Lessor, for the
satisfaction of any liability of Lessor with respect to this Lease, and shall
not seek recourse against the individual partners of Lessor, or its or their
individual partners, directors, officers or shareholders, or any of their
personal assets for such satisfaction.
21. Time of Essence. Time is of the essence with respect to the performance
of all obligations to be performed or observed by the Parties under this Lease.
22. No Prior or Other Agreements; Broker Disclaimer. This Lease contains
all agreements between the Parties with respect to any matter mentioned herein,
and no other prior or contemporaneous agreement or understanding shall be
effective. Lessor and Lessee each represents and warrants to the Brokers that
it has made, and is relying solely upon, its own investigation as to the nature,
quality, character and financial responsibility of the other Party to this Lease
and as to the nature, quality and character of the Premises. Brokers have no
responsibility with respect to negotiation, execution, delivery or performance
by either Lessor or Lessee under this Lease or any amendment or modification
hereto shall be limited to an amount up to the fee received by such Broker
pursuant to this Lease; provided, however, that the foregoing limitation on each
Broker's liability shall not be applicable to any gross negligence or willful
misconduct of such Broker.
23. Notices.
23.1 Notice Requirements. All notices required or permitted by this Lease
shall be in writing and may be delivered in person (by hand or by courier) or
may be sent by certified or registered mail or U.S. Postal Service Express Mail,
with postage prepaid, and shall be deemed sufficiently given if served in a
manner specified in this Paragraph 23. The addresses noted adjacent to a Party's
signature on this Lease shall be that Party's address for delivery or mailing of
notices. Either Party may by written notice to the other specify a different
address for notice, except that upon Lessee's taking possession of the Premises,
the Premises shall constitute Lessee's address for notice. A copy of all notices
to Lessor shall be concurrently transmitted to such party or parties at such
addresses as Lessor may from time to time hereafter designate in writing. See
Addendum.
23.2 Date of Notice. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. Notices
delivered by United States Express Mail or overnight courier that guarantee next
day delivery shall be deemed given twenty-four (24) hours after delivery of the
same to the Postal Service or courier. If notice is received on a Saturday,
Sunday or legal holiday, it shall be deemed received on the next business day.
24. Waivers. No waiver by Lessor of the Default or Breach of any term, covenant
or condition hereof by Lessee, shall be deemed a waiver of any other term,
covenant or condition hereof, or of any subsequent Default or Breach by Lessee
of the same or of any other term, covenant or condition hereof. Lessor's consent
to, or approval of, any act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to, or approval of, any subsequent or similar act
by Lessee, or be construed as the bases of an estoppel to enforce the provision
or provisions of this Lease requiring such consent. The acceptance of Rent by
Lessor shall not be a waiver of any Default or Breach by Lessee. Any payment by
Lessee may be accepted by Lessor on account of moneys or damages due Lessor,
notwithstanding any qualifying statements or conditions made by Lessee in
connection therewith, which such statements and/or conditions shall be of no
force or effect whatsoever unless specifically agreed to in writing by Lessor at
or before the time of deposit of such payment. 25. Recording. Either Lessor or
Lessee shall, upon request of the other, execute, acknowledge and deliver to the
other a short form memorandum of this Lease for recording purposes. The Party
requesting recordation shall be responsible for payment of any fees applicable
thereto. 26. No Right To Holdover. Lessee has no right to retain possession of
the Premises or any part thereof beyond the expiration or termination of this
Lease. In the event that Lessee holds over, then the Base Rent shall be
increased to one hundred fifteen percent (115%) of the Base Rent applicable
during the month immediately preceding the expiration or termination. Nothing
contained herein shall be construed as consent by Lessor to any holding over by
Lessee. 27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity. 28. Covenants and Conditions; Construction of Agreement. All
provisions of this Lease to be observed or performed by Lessee are both
covenants and conditions. In construing this Lease, all headings and titles are
for the convenience of the parties only and shall not be considered a part of
this Lease. Whenever required by the context, the singular shall include the
plural and vice versa. This Lease shall not be construed as if prepared by one
of the parties, but rather according to its fair meaning as a whole, as if both
parties had prepared it. 29. Binding Effect; Choice of Law. This Lease shall be
binding upon the parties, their personal representatives, successors and assigns
and be governed by the laws of the State in which the Premises are located. Any
litigation between the Parties hereto concerning this Lease shall be initiated
in the county in which the Premises are located. 30. Subordination; Attornment;
Non-Disturbance.
30.1 Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed upon the Premises, to any and all advances made on the security
thereof, and to all renewals, modifications, and extensions thereof. Lessee
agrees that the holders of any such Security Devices shall have no liability or
obligation to perform any of the obligations of Lessor under this Lease. Any
Lender may elect to have this Lease and/or any Option granted hereby superior to
the lien of its Security Device by giving written notice thereof to Lessee, this
Lease and such Options shall be deemed prior to such Security Device,
notwithstanding the relative dates of the documentation or recordation thereof.
30.2 Attornment. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership; (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one (1) month's rent.
30.3 Non-Disturbance. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving a commercially reasonable non-disturbance
agreement (a "Non-Disturbance Agreement") from the Lender which Non-Disturbance
Agreement provides that Lessee's possession of the Premises, and this Lease,
including any options to extend the term hereof, will not be disturbed so long
as Lessee is not in Breach hereof and attorns to the record owner of the
Premises. Further, within sixty (60) days after the execution of this Lease,
Lessor shall use its commercially reasonable efforts to obtain a Non-Disturbance
Agreement from the holder of any pre-existing Security Device which is secured
by the Premises. In the event that Lessor is unable to provide the
Non-Disturbance Agreement within said sixty (60) days, then Lessee may, at
Lessee's option, directly contact Lessor's lender and attempt to negotiate for
the execution and delivery of a Non-Disturbance Agreement. See Addendum.
30.4 Self-Executing. The agreements contained in this Paragraph 30 shall be
effective without the execution of any further documents; provided, however,
that, upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of the Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any
subordination, attornment and/or Non-Disturbance Agreement provided for herein.
31. Attorneys' Fees. If any Party brings an action or proceeding to enforce the
terms hereof or declare rights hereunder, the Prevailing Party in any such
proceeding, action, or appeal thereon, shall be entitled to reasonable
attorneys' fees.
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The attorneys' fees award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorneys' fees reasonably
incurred. In addition, Lessor shall be entitled to attorneys' fees, costs and
expenses incurred in the preparation and service of notices of Default and
consultations in connection therewith, whether or not a legal action is
subsequently commenced in connection with such Default or resulting Breach. 32.
Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents shall
have the right to enter the Premises at any time, in the case of an emergency,
and otherwise at reasonable times following notice for the purpose of showing
the same to prospective purchasers, lenders, or lessees, and making such
alterations, repairs, improvements or additions to the Premises as Lessor may
deem necessary. All such activities shall be without abatement of rent or
liability to Lessee. Lessor may at any time place on the Premises any ordinary
"For Sale" signs and Lessor may during the last six (6) months of the term
hereof place on the Premises any ordinary "For Lease" signs. Lessee may at any
time place on or about the Premises any ordinary "For Sublease" sign. 33.
Auctions. Lessee shall not conduct, nor permit to be conducted, any auction upon
the Premises without Lessor's prior written consent. Lessor shall not be
obligated to exercise any standard or reasonableness in determining whether to
permit an auction. 34. Signs. Except for ordinary "For Sublease" signs, Lessee
shall not place any sign upon the exterior of the Premises without Lessor's
prior written consent. All signs must comply with all Applicable Requirements.
35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, that Lessor may elect to continue any one or all
existing subtenancies. Lessor's failure within ten (10) days following any such
event to elect to the contrary by written notice to the holder of any such
lesser interest, shall constitute Lessor's election to have such event
constitute the termination of such interest. 36. Consents. Except as otherwise
provided herein, wherever in this Lease the consent of a Party is required to an
act by or for the other Party, such consent shall not be unreasonably withheld
or delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' and other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent, including but not limited to consents to an assignment, a
subletting or the presence or use of a Hazardous Substance, shall be paid by
Lessee upon receipt of an invoice and supporting documentation therefor.
Lessor's consent to any act, assignment or subletting shall not constitute an
acknowledgment that no Default or Breach by Lessee of this Lease exists, nor
shall such consent be deemed a waiver of any then existing Default or Breach,
except as may be otherwise specifically stated in writing by Lessor at the time
of such consent. The failure to specify herein any particular condition to
Lessor's consent shall not preclude the imposition by Lessor at the time of
consent of such further or other conditions as are then reasonable with
reference to the particular matter for which consent is being given. In the
event that either Party disagrees with any determination made by the other
hereunder and reasonably requests the reasons for such determination, the
determining party shall furnish its reasons in writing and in reasonable detail
within ten (10) business days following such request. 37. Guarantor.
37.1 Execution. [No text.]
37.2 Default. [No text.]
38. Quiet Possession. Subject to payment by Lessee of the Rent and
performance of all of the covenants, conditions and provisions on Lessee's part
to be observed and performed under this Lease, Lessee shall have quiet
possession and quiet enjoyment of the Premises during the term hereof.
39. Options.
39.1 Definition. "Option" shall mean: (a) the right to extend the
term of or renew this Lease.
39.2 Options Personal To Original Lessee. [No text.]
39.3 Multiple Options. In the event that Lessee has any multiple
Options to extend or renew this Lease, a later Option cannot be exercised unless
the prior Options have been validly exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option: (i) during the
period commencing with the giving of any notice of Default and continuing until
said Default is cured, (ii) during the period of time any Rent is unpaid
(without regard to whether notice thereof is given Lessee), (iii) during the
time Lessee is in Breach of this Lease.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) An Option shall terminate and be of no further force or effect,
notwithstanding Lessee's due and timely exercise of the Options, if, after such
exercise and prior to the commencement of the extended term, (i) Lessee fails to
pay Rent for a period of thirty (30) days after such Rent becomes due (without
any necessity of Lessor to give notice thereof), (ii) Lessor gives to Lessee
three (3) or more notices of separate Default during any twelve (12) month
period, whether or not the Defaults are cured, or (iii) if Lessee commits a
Breach of this Lease. 40. Multiple Buildings. If the Premises are a part of a
group of buildings controlled by Lessor, Lessee agrees that it will observe all
reasonable rules and regulations which Lessor may make from time to time for the
management, safety, and care of said properties, including the care and
cleanliness of the grounds and including the parking, loading and unloading of
vehicles, and that Lessee will pay its fair share of common expenses incurred in
connection therewith. 41. Security Measures. Lessee hereby acknowledges that the
rental payable to Lessor hereunder does not include the cost of guard service or
other security measures, and that Lessor shall have no obligation whatsoever to
provide same. Lessee assumes all responsibility for the protection of the
Premises, Lessee, its agents and invitees and their property from the acts of
third parties. 42. Reservations. Lessor reserves to itself the right, from time
to time, to grant, without the consent or joinder of Lessee, such easements,
rights and dedications that Lessor deems necessary, and to cause the recordation
of parcel maps and restrictions, so long as such easements, rights, dedications,
maps and restrictions do not unreasonably interfere with the use of the Premises
by Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions. 43.
Performance Under Protest. If at any time a dispute shall arise as to any amount
or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to pay such sum or any part thereof, said Party shall be entitled to
recover such sum or so much thereof as it was not legally required to pay. 44.
Authority. If either Party hereto is a corporation, trust, limited liability
company, partnership, or similar entity, each individual executing this Lease on
behalf of such entity represents and warrants that he or she is duly authorized
to execute and deliver this Lease on its behalf. Each party shall, within thirty
(30) days after request, deliver to the other party satisfactory evidence of
such authority.
PAGE 11 Initials /s/ GZ /s/ LMC
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<PAGE>
45. Conflict. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
46. Offer. Preparation of this Lease by either Party or their agent and
submission of same to the other Party shall not be deemed an offer to lease to
the other Party. This Lease is not intended to be binding until executed and
delivered by all Parties hereto.
47. Amendments. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make
such reasonable non-monetary modifications to this Lease as may be reasonably
required by a Lender in connection with the obtaining of normal financing or
refinancing of the Premises.
48. Multiple Parties. If more than one person or entity is named herein as
either Lessor or Lessee, such multiple Parties shall have joint and several
responsibility to comply with the terms of this Lease.
49. Mediation and Arbitration of Disputes. [No text.]
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES. THE PARTIES ARE URGED TO:
1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
LEASE.
2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF
THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE
POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE
STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE
SUITABILITY OF THE PREMISES FOR LESSEE'S INTENDED USE.
WARNING: IF THE PREMISES IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN
PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE
STATE IN WHICH THE PREMISES IS LOCATED.
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
Executed at: San Diego Executed at: San Diego
on: June 17, 1997 on: June 13, 1997
By LESSOR: By LESSEE:
LMC-Sorrento Investment Company, Agouron Pharmaceuticals, Inc.,
LLC, a California limited a California corporation
liability company
By: /s/ Lee M. Chesnut By: /s/ Glenn Zinser
------------------------------ -------------------------------
Name Printed: Lee M. Chesnut Name Printed: Glenn Zinser
Title: Manager Title: V.P., Operations
Address: 9627 Grossmont Summit Drive Address: 10350 North Torrey Pines
La Mesa, CA 91941 Road, La Jolla, CA 92037
Telephone: (619) 697-7777 Telephone: (619) 622-3000
Facsimile: (619) 697-7846 Facsimile: (619) 622-3298
NOTE: These forms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the most
current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 So. Flower
Street, Suite 600, Los Angeles, California 90017. (213) 687-8777. Fax No.
(213) 687-8616.
PAGE 12
<PAGE>
Addendum to Office Lease
This Addendum, dated June 13, 1997, constitutes an addendum to that
certain Standard Commercial/Industrial Single-Tenant ("the Lease") dated June
13, 1997, by and between (1) LMC-Sorrento Investment Company, LLC, a California
limited liability company, ("Lessor") and (2) Agouron Pharmaceuticals, Inc., a
California corporation ("Lessee"). Lessor and Lessee hereby supplement and amend
the Lease, as follows:
1.3 Term.
1.3.1 Original Term. The Original Term of the Lease
shall commence and Lessee shall be entitled to possession of the Premises for
the purpose of accomplishing Lessee's Work (defined below) on the
Commencement Date. As used herein, the term "Commencement Date" shall
mean the date on which Lessor and Lessee have each approved, in writing, the
working plans and specifications for Lessee's Work as hereinbelow provided. As
soon as practicable following the written approval by Lessor and Lessee of the
working plans and specifications for Lessee's Work, Lessor and Lessee shall
execute and deliver to each other a written memorandum confirming the
Commencement Date. Subject to Lessee's option to extend and unless sooner
terminated as herein provided, the term of the Lease shall expire at 11:59 p.m.
on the last day of the sixth Lease Year (defined below) which date is the
expiration of the Original Term. References in the Lease to "Start Date" shall
mean the Commencement Date.
1.3.2 Option to Renew. Lessee shall have the right
and option to renew the term of the Lease for a further term of five years
commencing on the expiration of the Original Term. If Lessee exercises
the option provided in the preceding sentence, then Lessee shall have a
further option to extend the Lease for an additional period of five years
commencing on the expiration of the first option period. The options to extend
the term of the Lease may be exercised only by the delivery by Lessee to Lessor,
not less than six months prior to the expiration of the term, of written
notice of such exercise. Lessee's exercise of the option(s) shall be
irrevocable. Lessee's occupancy during the option period(s) shall be subject
to all terms and conditions of the Lease; provided, however, the Base Rent
payable during the option period(s) shall be subject to adjustment as provided
in Sections 1.5.4, 1.5.5 and 1.5.6, below.
1.5 Base Rent.
1.5.1 Rent Commencement and Adjustment. As used
herein, the term "Rent Commencement Date" shall mean the earlier of (1) the date
of the issuance of a certificate of occupancy following completion of Lessee's
Work ("Substantial Completion") or (2) April 1, 1998, which date shall be
extended to the extent Lessor's actions or inaction result in delaying the
issuance of the certificate of occupancy (e.g. if Lessor's failure timely
to respond to a request for approval of a change order on the critical path
of Lessee's Work resulted in a two-day delay in the issuance of the certificate
of occupancy, then the outside date for the Rent Commencement Date would be
extended to January 3, 1998). Commencing on the Rent Commencement Date, Lessee
shall pay to Lessor Base Rent, in advance without deduction, offset, notice or
demand. Subject to adjustment as provided, below, a schedule of the Base Rent to
be paid during the Original Term is as follows:
Amount/
Applicable Period Square Foot-Month Amount/Month*
- ---------------- ----------------- -------------
Lease Year 1 $1.67 $ 90,180.00
Lease Year 2 $1.73 $ 93,420.00
Lease Year 3 $1.79 $ 96,660.00
Lease Year 4 $1.85 $ 99,900.00
Lease Year 5 $1.92 $103,680.00
Lease Year 6 $1.98 $106,920.00
*Based upon the Building having estimated 54,000 rentable square feet of floor
area.
<PAGE>
If the Rent Commencement Date occurs on other than the first day of a calendar
month, then the Base Rent for such partial month of the term of the Lease shall
be (1) prorated in the proportion that the number of days of the Lease is in
effect during such period bears to 30 and (2) be paid on the Rent Commencement
Date. Concurrently with the execution of the Lease, Lessee shall pay to Lessor
$90,180.00 which shall be credited against the Base Rent for the first full
calendar month following the Rent Commencement Date.
1.5.2 "Lease Year" Defined. As used herein, the
term "Lease Year" shall mean each 12-month period commencing on the Rent
Commencement Date if the Rent Commencement Date is the first day of a calendar
month, but otherwise on the first day of the calendar month immediately next
following the calendar month in which the Rent Commencement Date occurs, and
ending on the last day of the twelfth month thereafter. For example, (i) if the
Rent Commencement Date were September 15, 1997, (ii) the floor area of the
Building is determined to be 54,000 rentable square feet, then (1) on September
15, 1997, Lessee would owe and pay to Lessor $48,096.00 for prorated Base Rent
for September, 1997, (2) each Lease Year would begin on October 1 and would
expire on the following September 30 and (3) the Original Term of the Lease
would expire on September 30, 2003.
1.5.3 Adjustment to Base Rent During Original Term.
Promptly following Substantial Completion, Lessor and Lessee shall cause the
Building to be measured and the rentable floor area thereof to be determined
according to BOMA standards for a single-tenant free-standing building. If the
rentable floor are is determined to be more or less than 54,000 square feet,
then the Base Rent "Amount/Month" shown above in Section 1.5.1 shall be adjusted
based upon multiplying the rentable floor area of the Building as determined by
Lessor and Lessee by the "Amount/Square Foot-Month" for each Lease Year as shown
in Section 1.5.1 above (e.g. if the rentable floor area of the Building were
determined to be 54,300 square feet, then the monthly Base Rent for the first
Lease Year would be $90,681.00 and the Base Rent for each subsequent Lease Year
would be similarly adjusted). If, as of the Rent Commencement Date, Lessor and
Lessee have not agreed upon the rentable floor area of the Building, then,
pending determination of the rentable floor area of the Building, Lessee shall
pay Base Rent based upon an assumed rentable floor area of 54,000 square feet.
If the actual rentable floor area is subsequently determined to be more than
54,000 square feet, then, within 30 days following such determination, Lessee
shall pay to Lessor the difference between (1) the Base Rent which should have
been paid based upon the actual rentable floor area of the Building and (2) the
actual amount of Base Rent paid by Lessee prior to such determination. If it is
determined that the actual rentable floor area of the Building is less than
54,000 square feet, then Lessee shall be entitled to credit against the Base
Rent next coming due in an amount equal to the excess Base Rent paid by Lessee.
In the event of a dispute regarding determination of the rentable floor area of
the Building, then either Lessor or Lessee may submit the issue to determination
by arbitration under the auspices of the American Arbitration Association which
shall be conducted pursuant to the commercial rules. Except as otherwise
provided in this Lease, the venue for the arbitration shall be in the City of
San Diego. With respect to the conduct of the arbitration, the following shall
apply:
(a) Not less than three weeks in advance of the date for the
commencement of the arbitration hearing, Lessor and Lessee shall each exchange
(1) the name, address and qualifications of any engineer, architect or other
expert intended to be called at the time of the arbitration (each, an "Expert")
and reports, measurements and/or data relied upon by the Expert in connection
with forming an opinion as to the rentable floor area of the Building.
(b) Not less than five days prior to the date set for the hearing on
the arbitration, each party shall (i) make available for an oral deposition any
Expert whose testimony is expected to be
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given at the time of the arbitration and (ii) deliver to the other party all
exhibits which are intended to be entered into evidence at the time of the
arbitration.
(c) Each party shall bear their own attorney's fees and Expert's fees
incurred in connection with the arbitration. Each party shall share equally in
the administrative fees owed to the American Arbitration Association and the
reasonable hourly fees owed to the arbitrator.
(d) Following rendition of the arbitrator's award, either party may
petition the Superior Court of the State of California for the County of San
Diego to have the award confirmed and entered as a judgment.
1.5.4 Determination of Base Rent for First Lease
Year of First Option Period. The Base Rent to be paid by Lessee to Lessor
during the first Lease Year of the first option period shall be the Market
Rental Rate (defined below), but, in no event shall the Base Rent for the first
Lease Year of the first option period be less than the Base Rent for the sixth
Lease Year of the Original Term. As used herein, the term "Market Rental
Rate" shall mean that rate which is prevailing as of the commencement of the
first Lease Year of the first option period for comparable space in a
comparable office building in the Sorrento Valley area of San Diego, California,
taking into consideration the size and age of, and improvements in, the
Premises, the five-year term of the option period, the contribution made by
Lessee to the improvements to the Premises and other relevant factors, and
which Market Rental Rate shall be determined as follows:
(a) By mutual agreement between Lessor and Lessee evidenced in a
writing signed by each and mutually delivered; or
(b) If Lessor and Lessee have not agreed upon the Market Rental Rate
prior to the commencement of the first Lease Year of the option period, then
either Lessor or Lessee may submit the issue of Market Rental Rate to
determination by arbitration under the auspices of the American Arbitration
Association which shall be conducted pursuant to the commercial rules except as
otherwise provided in this Lease. The venue for the arbitration shall be in the
City of San Diego. With respect to the conduct of the arbitration, the following
shall apply:
(i) Not less than three weeks in advance of the date for the
commencement of the arbitration hearing, Lessor and Lessee shall each exchange
(1) the name, address and qualifications of any appraiser, broker or other
expert intended to be called at the time of the arbitration (each, an "Expert"),
(2) any reports and/or data relied upon by the Expert in connection with forming
an opinion as to Market Rental Rate and (3) a statement as to each party's
determination of the Market Rental Rate ("MRR Statement") (i.e., Lessor shall
give to Lessee Lessor's determination of the Market Rental Rate and vice-versa).
(ii) For a period of ten days following the exchange of the MRR
Statements, either party may accept the Market Rental Rate stated in the other
party's MRR Statement and, in such event, the accepted amount will become the
Base Rent for the first Lease Year of the option period (e.g., if Lessor
delivered to Lessee timely written notice of acceptance of Lessee's
determination of Market Rental Rate as provided in Lessee's MRR Statement, then
the amount shown on Lessee's MRR Statement would become the Base Rent for the
first Lease Year of the option period).
(iii) If neither party accepts the other party's determination of
Market Rental Rate, then the arbitration shall be conducted before a single
arbitrator who shall be selected pursuant to the commercial rules. Not less than
five days prior to the date set for the hearing for the arbitration, each party
shall (1) make available for an oral deposition any Expert whose testimony is
expected to be given at the time of the arbitration and (2) deliver
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to the other party all exhibits which are intended to be entered into evidence
at the time of the arbitration.
(iv) Except as provided below, each party shall bear their own
attorney's fees and Expert's fees. Except as provided below, each party shall
share equally any administrative fees owed to the American Arbitration
Association and the reasonable hourly fees owed to the arbitrator.
Notwithstanding the foregoing, if the amount of the Market Rental Rate stated in
Lessee's MRR Statement is less than 95 percent of the Market Rental Rate
determined by the arbitrator, then the arbitrator may, in the arbitrator's
discretion, assess against Lessee costs incurred by Lessor in connection with
the arbitration including, without limitation, reasonable attorney's fees,
Expert's fees, arbitrator's fees and administration fees. If the amount of the
Market Rental Rate stated in Lessor's MRR Statement is greater than 105 percent
of the Market Rental Rate determined by the arbitrator, then the arbitrator may,
in the arbitrator's discretion, assess against the Lessor costs incurred by
Lessee in connection with the arbitration including, without limitation,
reasonable attorney's fees, Expert's fees, arbitrator's fees and administration
fees.
(v) Following rendition of the arbitrator's award, either
party may petition the Superior Court of the State of California for the County
of San Diego to have the award confirmed and entered as a judgment.
Pending determination of the Market Rental Rate for the first option period,
Lessee shall pay to Lessor Base Rent in an amount equal to 105 percent of the
Base Rent in effect during the sixth Lease Year. If the Market Rental Rate is
greater than 105 percent of the Base Rent payable during the sixth Lease Year,
then, within 30 days following the arbitrator's decision determining the amount
of the Market Rental Rate, Lessee shall pay to Lessor the difference between (1)
the Base Rent which should have been paid during the first Lease Year of the
first option period based upon the Market Renal Rate and (2) the actual amount
of the Base Rent paid by Lessee during the first Lease Year of the first option
period. If it is determined that the Market Rental Rate is less than one hundred
five percent of the Base Rent payable during the sixth Lease Year, then Lessee
shall be entitled to credit against Base Rent next coming due in an amount equal
to the excess paid by Lessee.
1.5.5 Determination of Base Rent for First Lease
Year of Second Option Period. The Base Rent to be paid by Lessee to Lessor
during the first Lease Year of the second option period shall be the Market
Rental Rate which is prevailing as of the commencement of the first Lease
Year of the second option period and shall be determined in the same manner
as determining Market Rental Rate for the first Lease Year of the first
option period as provided above in Section 1.6.3; provided, however, in
no event shall the Base Rent for the first Lease Year of the second option
period be less than the Base Rent for the fifth Lease Year of the first option
period. Pending determination of the Market Rental Rate for the second option
period, Lessee shall pay to Lessor Base Rent in an amount equal to 105 percent
of the Base Rent in effect during the fifth Lease Year of the first
option period. If the Market Rental Rate is greater than 105 percent of the Base
Rent payable during the fifth Lease Year of the first option period, then,
within 30 days following the arbitrator's decision determining the amount of the
Market Rental Rate, Lessee shall pay to Lessor the difference between (1) the
Base Rent which should have been paid during the first Lease Year of the second
option period based upon the Market Rental Rate and (2) the actual amount of the
Base Rent paid by Lessee during the first Lease Year of the second option
period. If it is determined the Market Rental Rate is less than 105 percent of
the Base Rent payable during the fifth Lease Year of the first option period,
then Lessee shall be entitled to credit against the Base Rent next coming due in
an amount equal to the excess paid by Lessee.
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1.5.6 Determination of Base Rent for Subsequent
Lease Years of Option Period(s). The Base Rent for each subsequent Lease Year
of the option periods will be equal to the amount derived by multiplying the
Base Rent for the first Lease Year of the option period by a fraction, the
numerator of which is the Index (defined below) amount for the last period
for which the Index is published and which ends before the commencement
of the Lease Year for which the calculation is being made and the denominator
of which is the Index amount for the same calendar period immediately
preceding the commencement of the option period. The "Index" is that which is
published by the United States Department of Labor, Bureau of Labor Statistics,
in the Consumer Price Index for all urban consumers for the Los Angeles area,
all items, 1982-84 base. By way of example, if the Base Rent for the second
Lease Year of the first option period were to be determined based upon the
assumptions that (1) the first option period commenced October 1, 2003,
(2) the Base Rent for the first Lease Year of the option period is $108,000.00,
(3) the Index is published monthly, (4) the Index amount for September 2003 is
225.0 and (5) the Index amount for September 2004 is 234.0, then the Base Rent
for the second Lease Year of the first option period would be $112,320.00. If
the Bureau of Labor Statistics discontinues the publication of the Index or
publishes the Index less frequently, or alters the Index in some other manner,
then Lessor and Lessee will adopt a substitute index or substitute procedure
which reasonably reflects and monitors changes in consumer prices. In no event
will the Base Rent during the subsequent Lease Years of an option period be
reduced below the Base Rent for the first Lease Year of the option period.
Lessor's failure, by reason of oversight, mistake or otherwise, to make the
calculation or advise Lessee thereof prior to the end of any Lease Year or to
collect any increased Base Rent determined as set forth in this paragraph, will
not release Lessee of Lessee's obligation to pay to Lessor, forthwith upon
discovery of such oversight or mistake, an amount equal to the difference
between the Base Rent actually paid and the increased Base Rent that should have
been paid during the period in which such mistake or oversight continued.
1.7 Security Deposit. Upon execution of the Lease, Lessee
shall pay to Lessor $90,180.00 which shall constitute the Security Deposit.
Commencing on the Commencement Date, the Security Deposit shall bear interest
for the benefit of Lessee at the rate of four percent per annum. Interest
accrued on the Security Deposit shall be paid by Lessor to Lessee on the first
day of each Lease Year commencing on the first day of the second Lease Year.
6.2 Hazardous Substances. Other than (1) two percent
crystalline asbestos found in floor tile mastic (which shall be removed by
Lessee's contractor at Lessor's expense during the course of completing Lessee's
Work) and (2) any matters which may be disclosed in the Phase I Environmental
Assessment prepared by Natec Environmental Reporting dated April 1, 1996 (a copy
of which has been delivered to Lessee), Lessor represents and warrants that
Lessor has no actual knowledge of the presence on the Premises of any Hazardous
Substances (defined below).
6.2.1 Definition of "Hazardous Material". As used
herein, the term "Hazardous Material" means any hazardous or toxic substance,
material or waste which is or becomes regulated by any local governmental
authority, the State of California or the United States government. The term
"Hazardous Material" includes, without limitation, any material or
substance which is (i) defined as a "hazardous waste," "extremely hazardous
waste" or "restricted hazardous waste" under Section 25515 or 25117, or
listed pursuant to Section 25140, of the California Health and Safety Code,
Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii) defined as a
"hazardous substance" under Section 25316 of the California Health and
Safety Code, Division 2, Chapter 6.8 (Carpenter-Presly-Tanner Hazardous
Substance Account Act), (iii) Defined as a "hazardous material,"
"hazardous substance" or "hazardous waste" under Section 25501 of the California
Health and
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Safety Code, Division 20, Chapter 6.95 (Hazardous Substances), (iv)
petroleum, (v) asbestos, (vi) listed under Article 9 and defined as hazardous or
extremely hazardous pursuant to Article 11 of Title 22 of the California
Administrative Code, Division 4, Chapter 20, (vii) designated as a "hazardous
substance" pursuant to Section 311 of the Federal Water Pollution Control Act
(33 U.S.C. Section 1317), (viii) defined as a "hazardous waste" pursuant to
Section 1004 of the Federal Resource Conversation and Recovery Act, 42 U.S.C.
Section 6901, et. seq. (42 U.S.C Section 6903), or (ix) defined as "hazardous
substance" pursuant to Section 101 of the Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C. Section 9601 et. seq. (42 U.S.C.
Section 9601).
6.2.2 Prohibition/Compliance. Lessee shall not
cause or permit any Hazardous Material (as defined above) to be brought upon,
kept or used in or about the Premiss or the Project in violation of applicable
law by Lessee, its agents, employees, contractors or invitees. If Lessee
breaches the obligation stated in the preceding sentence, or if the presence
of Hazardous Material results in unlawful contamination of the Premises, or any
adjacent property by Hazardous Material otherwise occurs during the term of
this Lease or any extension or renewal hereof or holding over hereunder, then
Lessee shall indemnify, defend and hold Lessor, its agents and contractors
harmless from any and all claims, judgment,s
damages, penalties, fines, costs, liabilities, or losses (including without
limitation diminution in value of the Premises, damages for the loss or
restriction on use of rentable or usable space or of any amenity of the
Premises, damages arising from any adverse impact on marketing of space in the
Premises and sums paid in settlement of claims, attorneys' fees, consultant fees
and expert fees) which arise during or after he Lease term as a result of such
contamination. For the purpose of this Section 6.2, unlawful contamination is
Hazardous Material which violates any applicable local, state or federal las or
any regulations or standards promulgated thereunder, including requirements or
standards imposed by any governmental agency or by governmental order or court
having jurisdiction over the Premises. This indemnification of Lessor by Lessee
includes, without limitation, costs incurred in connection with any
investigation of site conditions or any cleanup, remedial, removal, or
restoration work required by any federal, state or local governmental agency or
political subdivision because of Hazardous material present in the air, soil or
ground water above on or under the Premises. Without limiting the foregoing, if
the presence of any Hazardous Material on the Premises or any adjacent property,
caused or permitted by Lessee results in any unlawful contamination of the
Premises, or any adjacent property, Lessee shall promptly take all actions at
its sole expense as are necessary to ensure the Premises, or any adjacent
property meets all applicable local, state and federal laws and any regulations
or standards promulgated thereunder, in effect now or in the future, including
requirements by any governmental agency or impose by any governmental order or
court having jurisdiction over the Premises, provided that Lessor's approval of
such action shall first be obtained, which approval shall not unreasonably be
withheld so long as such actions would not potentially have any material adverse
long-term or short term effect on the Premises.
6.2.3 Business. Lessor acknowledges that it is not
the intent of this Section 6.2 to prohibit Lessee from operating its business
as described in Section 1.8 above. Lessee may operate its business according to
the custom of the industry so long as the use or presence of Hazardous Material
is strictly and properly monitored according to all applicable governmental
requirements. As a material inducement to Lessor to allow Lessee to use
Hazardous Material in connection with its business, Lessee agrees to deliver
to Lessor prior to the Rent Commencement Date a list identifying each type of
Hazardous Material to be present on the Premises and setting forth any and all
governmental approvals or permits required in connection with the presence
of such Hazardous Material on the Premises ("Hazardous Material List").
Lessee shall deliver to Lessor an updated Hazardous Material List at least once
a year. Lessee shall deliver to Lessor true and correct copies of the
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following documents (hereinafter referred to as the "Documents") relating
to the handling, storage, disposal and emission of Hazardous Material
prior to the Rent Commencement Date, or if unavailable at that time,
concurrent with the receipt from or submission to a governmental agency:
permits, approvals, reports and correspondence, storage and management
plans, notice of violations of any laws, plans relating to the installation of
any storage tanks to be installed in or under the Project (provided, said
installation of tanks shall only be permitted after Lessor has given Lessee its
written consent to do so, which consent may be withheld in Lessor's sole and
absolute discretion); and all closure plans or any other documents required by
any and all federal, state and local governmental agencies and authorities for
any storage tanks installed in, on or under the Project for the closure of any
such tanks. Lessee is not required, however, to provide Lessor with any
portion(s) of the Documents containing information of a proprietary nature
which, in and of themselves, do not contain a reference to any Hazardous
Material or hazardous activities. It is not he intent of this Section to
provided Lessor with information which could be detrimental to Lessee's business
should such information become possessed by Lessee's competitors.
6.2.4 Termination of Lease. Notwithstanding the
provisions of Section 6.2.2 above, if Lessee or the proposed assignee or
sublessee is subject to an enforcement order issued by any governmental
authority in connection with the use, disposal or storage of a Hazardous
Material at the Project, Lessor shall have the right to terminate the Lease in
Lessor's sole and absolute discretion (with respect to any such matter
involving Lessee) and it shall not be unreasonable for Lessor to withhold its
consent to any proposed assignment or subletting (with respect to any such
matter involving a proposed assignee or sublessee).
6.2.5 Hazardous Substances. References in the Lease
to the term "Hazardous Substances" shall have the same meaning as Hazardous
materials as defined in this Addendum.
6.4 Inspection/Compliance. Lessor and Lessor's Lender and
consultants shall have the right to enter into the Premises at any time in the
case of an emergency and otherwise at reasonable times with reasonable notice
for the purpose of inspecting the condition of the Premises and for verifying
compliance by Lessee with the Lease. The cost of any such inspections shall be
paid by Lessor, unless a material violation by Lessee of Applicable
Requirements, or a contamination by Lessee is found to exist or be imminent, or
the inspection is requested or ordered by a governmental authority and Lessee
has failed to adequately respond. In such case, Lessee shall upon request
reimburse Lessor for the cost of such inspections, so long as such inspection is
directly related to the violation or contamination.
8.3 Earthquake Insurance. As part of the insurance pertaining
to the Building and improvements on the Premises, the Insuring Party shall
obtain and keep in force a policy in the name of Lessor with loss payable to
Lessor and any Lender insuring loss or damage to the Premises caused by
earthquake.
8.5 Insurance Policies. The requirement for 30 days notice to
Lessor of a modification to an insurance policy shall only apply to any
modification which results in the policy no longer being in compliance with the
requirements of the Lease.
8.6 Waiver of Subrogation. To the extent permitted by law and
without affecting the coverage provided by any policy of insurance required to
be maintained under the Lease, Lessor and Lessee each waive the right to recover
against the other (1) damage for injury to or death of persons, (2) damage to
property, (3) damage to the Premises or any part thereof and/or (4) claims
arising by reason of any of the foregoing, but only to the extent that any of
the foregoing damages and/or claims under subparts (1) through (4) hereof are
covered, and only to the extent of such coverage, by policies of insurance
actually carried or required to
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be carried under the Lease by either Lessor and/or Lessee. This provision is
intended to waive fully, and for the benefit of each party, any rights and
claims which might give rise to a right of subrogation in any insurance
carrier. Each party shall procure a clause or endorsement on any policy
required under the Lease denying to the insurer rights of subrogation against
the other party to the extent rights have been waived by the insured prior to
the occurrence of injury or loss.
9.3 Partial Damage--Uninsured Loss. If a Premises Partial
Damage that is not an Insured Loss occurs, unless caused by the negligent or
willful act of Lessee (in which event, Lessee shall make the repairs at Lessee's
expense), Lessor shall repair such damage as soon as reasonably possible at
Lessor's expense and this Lease shall continue in full force and effect;
provided, however, if the reasonably estimated cost of repairing the Premises
Partial Damage that is not an Insured Loss exceeds $600,000.00, then the
following shall apply:
9.3.1 Lessor may deliver to Lessee written notice of
Lessor's intention to terminate the Lease. In order to be effective,
Lessor's notice of termination must be delivered to Lessee within 30-days
following receipt by Lessor of knowledge of the occurrence of the Premises
Partial Damage that is not an Insured Loss.
9.3.2 If, within 30 days following receipt by Lessee
of Lessor's notice of intention to terminate, Lessee delivers to Lessor
written notice of Lessee's commitment to pay the cost of the repair in excess
of $600,000.00, then the Lease shall remain in full force and effect and Lessor
shall cause the repair to be accomplished and Lessor shall pay the first
$600,000.00 of the cost of such repair and Lessee shall pay for all costs of
repair in excess of $600,000.00.
9.3.3 If, within the 30-day period following
delivery to Lessee of Lessor's notice of termination, Lessee fails to deliver
written notice of Lessee's commitment to pay for repair costs in excess of
$600,000.00, then, upon the expiration of the 30-day period, the Lease shall
terminate.
10.2 Impounding of Real Property Taxes. Notwithstanding
Section 10.2(b) of the Lease, if Lessor's lender which has a first mortgage or
deed of trust on the Premises requires impounding of Real Property Taxes, then
Lessee shall pay to Lessor (and Lessor shall pay to Lessor's lender) the amount
of such real property tax impounds.
12.3 Lessee's Affiliates/Rent Recapture. Notwithstanding
anything contained in Section 12 of the Lease to the contrary, Lessee shall have
the right to assign the Lease and/or sublet all or any portion of the Premises
to a Lessee's Affiliate. As used herein "Lessee's Affiliate" shall mean either
(1) any subsidiary corporation as to which Lessee owns 75 percent or more of the
outstanding shares and/or (2) a parent corporation which owns 75 percent or more
of the outstanding shares of Lessee. With the exception of any assignment or
subleasing to Lessee's Affiliate, Lessee shall pay to Lessor, as additional
rent, if and when received by Lessee, 50 percent of any excess rent or other
premium on the assignment, subleasing or other transfer (e.g., if the
assignment, sublease or other transfer document provides that the assignee,
subtenant or other transferee thereunder is to pay any amount in excess of the
rent and other charges due under this Lease, whether such premium be in the form
of an increased monthly or annual rental, lump sum payment in consideration of
the assignment, sublease or other transfer or consideration of any other form,
including a sale of goodwill and/or a covenant not to compete or payment for
furniture, fixtures or inventory in an amount in excess of the reasonable value
thereof) after first deducting the reasonable costs incurred by Lessee in
obtaining the assignment, sublease or transfer, including, without limitation,
reasonable brokerage commissions and reasonable costs of leasehold
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improvements made by Lessee, which costs shall be amortized over the shorter
of the useful life of such improvements or the remaining term of this
Lease as of the installation of such leasehold improvements.
13.2 Lessor's Remedies. In the event of any Default or other
Breach by Lessee, Lessor may, at any time thereafter, with or without notice or
demand and without limiting Lessor in the exercise of any right or remedy which
Lessor may have by reason of such Default or Breach, maintain Lessee's right to
possession in which case the Lease shall continue in effect whether or not
Lessee shall have abandoned the Premises. In such event, Lessor shall be
entitled to enforce all of Lessor's rights and remedies under the Lease,
including the right to recover the rent as it becomes due hereunder. The parties
acknowledge and agree that Lessor shall have the remedy under Civil Code section
1951.4 which provides in part:
The lessor has the remedy described in California Civil Code
section 1951.4 (lessor may continue lease in effect after lessee's
breach and abandonment and recover rent as it becomes due, if lessee
has right to sublet or assign, subject only to reasonable limitations).
13.4 Late Charge. If any Rent shall not be received by Lessor
within five days after such amount shall be due, then, without any requirement
for notice to Lessee, Lessee shall pay to Lessor a one-time late charge equal to
the lesser of $500.00 or five percent of such overdue amount. If any Rent shall
not be received by Lessor within 10 days after such amount shall be due, then,
without any requirement for notice to Lessee, Lessee shall pay to Lessor a
one-time late charge equal to five percent of such overdue amount less the
amount of the late charge owed under the preceding sentence. By way of example,
assume that Lessee failed to pay Base Rent in the amount of $90,180.00 which was
due on February 1, 1997, then, under those assumed facts, (1) if Lessee had not
paid the Base Rent by February 6, 1997, a late charge in the amount of $500.00
would be due and (2) if the Base Rent remained unpaid as of February 11, 1997,
then the total amount of late charges owed by Lessee for the default would be
$4,509.00.
15.3 Brokers' Commissions. To the extent any real estate
commissions are owed by Lessor pursuant to separate written agreements, Lessor
shall be solely responsible for payment of such commissions. Lessor hereby
discloses Lee M. Chesnut (a principal of Lessor) is a licensed California real
estate broker.
23. Notices. The provisions of Section 23 of the Lease shall not apply
to any notices which are required to be served by Lessor as a condition
precedent to the initiation of a special proceeding for unlawful detainer. Any
notices required to be served as a condition precedent to the initiation of a
special proceeding for unlawful detainer (including any notices under Section
13.1 of the Lease) shall be served in accordance with Code of Civil Procedure
section 1162 as such section may be subsequently amended, repealed or replaced.
With respect to all other notices, the parties acknowledge and agree that, in
addition to the manner of delivery provided in Section 23 of the Lease, notices
may be delivered by Federal Express or other similar overnight delivery service
which provides evidence of receipt. If notice is delivered by Federal Express or
such other overnight delivery service, the notice shall be deemed delivered as
of the date shown by the evidence of receipt.
30. Attornment and Nondisturbance. Lessee acknowledges that the
Subordination, Non-Disturbance and Attornment Agreement attached hereto as
Exhibit 1 is in form and content acceptable to Lessee and constitutes a
"commercially reasonable Non-Disturbance Agreement" within the meaning of
Section 30.3 of the Lease.
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31. Attorneys' Fees; Jury Trial Waiver. Lessor shall further be
entitled to recover reasonable attorney's fees incurred in connection with any
hearing or motion for assumption or rejection of the Lease under Title 11 of the
United States Code. Lessee shall be further entitled to recover reasonable
attorney's fees in connection with any hearing or adversary proceedings related
to this Lease in any bankruptcy case filed by or against Lessor. Lessor and
Lessee hereby waive their respective right to trial by jury of any cause of
action, claim, counter-claim or cross-complaint in any action, proceeding and/or
hearing brought by either Lessor against Lessee or Lessee against Lessor on any
matter whatsoever arising out of, or in any way connected with, this Lease, the
relationship of Lessor and Lessee, Lessee's use or occupancy of the Premises or
any claim of injury or damage or the enforcement of any remedy under law,
statute or regulation, emergency or otherwise, now or hereafter in effect.
34. Signage. Lessee shall be entitled to install a monument sign in the
location depicted in the site plan attached hereto as Exhibit 2. All other signs
placed in the exterior of the Premises and/or upon the Building shall be subject
to Lessor's prior written approval which shall not be unreasonably withheld or
delayed.
50. Lessee's Work.
50.1 Approval of Lessee's Plans, Specifications and
Contractor. Within 45 days following execution of the Lease, Lessee shall cause
to be prepared and delivered to Lessor (1) preliminary space plan drawings and
(2) preliminary specifications for the improvements, fixtures and equipment to
be installed into the Premises. Within two business days following Lessor's
receipt of the preliminary plans and specifications, Lessor shall provide to
Lessee approval of such preliminary plans and specifications unless Lessor has a
reasonable and material objection thereto. Within 45 days following Lessor's
approval of the preliminary plans and specifications, Lessee shall cause to be
prepared and delivered to Lessor (1) working plans which are sufficiently
detailed in order to apply for and obtain a building permit for the interior
improvements to the Premises which shall be based upon the preliminary plans
previously approved by Lessor and (2) final specifications for the improvements,
fixtures and equipment to be installed into the Premises which shall be based
upon the preliminary specifications previously approved by Lessor. Within two
business days following Lessor's receipt of the working plans and
specifications, Lessor shall approve such plans and specifications unless Lessor
has a reasonable and material objection thereto. Following Lessor's approval of
the working plans and specifications, Lessee shall submit the working plans and
specifications to the Building Inspection Department of the City of San Diego
for the purpose of obtaining a building permit for the construction of the work
described in the working plans and specifications (hereinafter "Lessee's Work").
If, during the course of construction of Lessee's Work, Lessee determines that
it is necessary or desirable to make a material change to the working plans and
specifications, then such proposed change shall be first submitted to Lessor for
Lessor's review and approval, which shall not be unreasonably withheld or
delayed. Prior to commencement of Lessee's Work, Lessee shall submit to Lessor
the name, telephone number, license number and contact representative for the
general contractor whom Lessee intends to use to accomplish Lessee's Work.
Within two business days following Lessor's receipt of such information
concerning the proposed general contractor, Lessor shall approve Lessee's
selection of the general contractor unless Lessor has a reasonable and material
objection thereto. If Lessor's lender who is furnishing all or a portion of the
funds for Lessor's Allowance requires similar rights of approval of the plans,
specifications and/or contractor, Lessee shall cooperate with Lessor to satisfy
such lender's reasonable requests for information and requirements for approval.
10
<PAGE>
50.2 Completion of Lessee's Work. Following Lessor's approval
of the working plans and specifications and the issuance by the City of San
Diego of a building permit for Lessee's Work, Lessee shall, thereafter,
diligently, competently and expeditiously complete Lessee's Work. With the
exception of Lessor's obligations with respect to payment of Lessor's Allowance
(defined below), Lessee shall indemnify and hold Lessor harmless from and
against any and all claims, liabilities, damages, penalties, fines and costs
arising out of or relating to the completion of Lessee's Work including, without
limitation, any claims of lien for payment by any general contractor,
subcontractor and/or material supplier and/or any claim for death or injury to
persons and/or damage to property.
50.3 Lessor's Allowance. Concurrently with the approval by
Lessor of the working plans and specifications and subject to adjustment as
provided below, Lessor shall deliver to Lessee evidence of availability of
$2,430,000.00 ("Lessor's Allowance") to be used to pay the cost of Lessee's
Work. Lessor's Allowance shall be used to pay the fees, costs and expenses owed
to the architects, engineers, general contractor, subcontractors and/or
materials suppliers furnishing labor and materials to accomplish Lessee's Work.
Lessor's Allowance shall also be used to pay for liability and course of
construction insurance maintained by Lessor and/or Lessee during the completion
of Lessee's Work and Lessor's Expansion Work. Lessor shall pay to Lessee
Lessor's Allowance within ten days following delivery by Lessee to Lessor of (1)
a copy of the certificate of occupancy and (2) lien releases upon final payment
showing "$0.00" as the disputed amount from Lessee's contractor and all other
subcontractors and material suppliers who furnished labor and materials to the
Premises for Lessee's Work; provided, however, if there exists a dispute with
respect to the amount owed to Lessee's contractor or a subcontractor or material
supplier, Lessor shall only withhold an amount equal to 150 percent of the
disputed amount and shall disburse to Lessee the balance of Lessor's Allowance.
Lessor and Lessee agree that the amount of Lessor's Allowance as provided above
has been calculated based upon an estimated completed rentable floor area for
the Premises of 54,000 rentable square feet. If the approved plans for Lessor's
Expansion Work (defined below) result in the estimated rentable floor area of
the Premises being more or less than 54,000 square feet, then the amount of
Lessor's Allowance shall be calculated by multiplying what Lessee and Lessor
estimate to be the final rentable floor area of the Building following
completion of Lessor's Expansion Work by $45.00 (e.g., if, based upon the
approved plans for Lessor's Expansion Work, the estimated rentable floor area of
the Building will be, upon completion, 54,300 square feet, then Lessor's
Allowance would be $2,443,500.00). In addition to the amount of Lessor's
Allowance, Lessor shall pay for Lessee's contractor to install in the Building
an elevator.
50.4 Special Provisions Re Lessee's Work. With respect
to Lessee's Work, Lessor and Lessee further agree:
50.4.1 Interior Accessibility Requirements. In the
context of performing Lessee's Work, Lessee shall be responsible for
installing into the interior of the Building all improvements which may be
required to comply with Americans with Disabilities Act and/or any other
similar laws concerning accessibility. Lessor shall, at Lessor's sole cost and
expense, be responsible for compliance with any such laws as they pertain to the
exterior parking areas, walkways and driveways of the Premises and entrances to
the Building.
50.4.2 Roof. In the course of performing Lessee's
Work, Lessee shall be responsible to replace the roof covering of the
Building such that, upon Substantial Completion, the roof shall be in new
condition. Without limiting the generality of the foregoing, Lessee shall
assure that all mechanical systems installed on the roof are properly
installed over sheet metal pad with proper flashing and sealing.
Notwithstanding Sections 2.3 and 7.1(c) of the Lease, Lessor shall not be
responsible for any
11
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maintenance, repair and/or replacement of the roof during the term of the
Lease. In addition to Lessor's Allowance, Lessor shall contribute
$25,000.00 to the cost of replacing the roof covering.
50.4.3 Improvements to be Surrendered Upon
Expiration/Termination of Lease. All of Lessee's Work shall, upon expiration or
termination of the Lease, be surrendered to Lessor and shall become Lessor's
property. Lessee acknowledges and agrees that the fume hoods, laboratory
benches, laboratory sinks and mechanical system shall not constitute Lessee's
fixtures which Lessee is entitled to remove upon the expiration or termination
of the Lease. In connection with preparation and approval of the plans and
specifications for Lessee's Work, Lessor and Lessee shall prepare and agree
upon a list of Trade Fixtures which Lessee is entitled to remove at the
expiration or termination of the Lease (collectively "the Removable
Fixtures"). If, prior to approval of the working drawings for Lessee's Work,
Lessor and Lessee are unable to agree upon the fixtures to be included
within the Removable Fixtures, then either party ("the Notifying Party") may
submit to the other party ("the Receiving Party") a list of the fixtures which
the Notifying Party is willing to agree to as constituting the Removable
Fixtures. Within five business days following receipt of the list of proposed
Removable Fixtures from the Notifying Party, the Receiving Party shall either
(1) accept the list of the Removable Fixtures (in which case, the list submitted
by the Notifying Party shall become the list of Removable Fixtures) or (2)
deliver to the Notifying Party a list of fixtures which the Receiving Party is
willing to agree to as constituting the Removable Fixtures. Within five business
days following receipt by the Notifying Party of the Receiving Party's list of
proposed Removable Fixtures, the Notifying Party shall either (1) accept the
Receiving Party's list of proposed Removable Fixtures (in which case, the list
prepared by the Receiving Party shall constitute the list of Removable Fixtures)
or (2) deliver notice to the Receiving Party that the Notifying Party elects to
terminate the Lease (in which case, the Lease shall terminate, Lessor shall
refund to Lessee the Security Deposit and any advance payment of Rent and the
parties shall have no further obligations to each other under the terms of the
Lease).
50.5 Payment of Excess Costs/Refund of Unused Lessor's
Allowance. As soon as practicable following Substantial Completion, Lessee and
Lessee's contractor shall perform an accounting of the total costs incurred to
accomplish Lessee's Work (including all costs for design, permitting, inspection
and utilities). If the total cost for Lessee's Work exceeds the amount of
Lessor's Allowance, then Lessee shall pay such excess. If the total cost of
Lessee's Work is less than the amount of Lessor's Allowance then the following
shall apply:
50.5.1 Subject to Lessor's prior approval, which
shall not be unreasonably withheld or delayed, Lessee may, during the first
Lease Year, utilize the remaining balance of Lessor's Allowance for the
installation into the Premises of additional permanent fixtures and
improvements (collectively "Additional Work").
50.5.2 If, by the expiration of the first Lease
Year, the total amount of Lessor's Allowance has not been expended for the
completion of Lessee's Work and/or Additional Work and improvements as
provided in the preceding sentence, then, within 30 days following the
expiration of the first Lease Year, Lessor shall refund to Lessee the amount of
the difference between Lessor's Allowance and the total amount expended for
Lessee's Work Additional Work.
51.1 Approval of Expansion Plans, Specifications and
Contractor. Within 45 days following execution of the Lease, Lessee shall cause
to be prepared and delivered to Lessor (1) preliminary drawings pertaining to
(i) the proposed expansion of the second floor mezzanine of the Building by the
addition of approximately 10,000 square feet and (ii) installation of windows
12
<PAGE>
in the exterior walls and other improvements to cause the new second story space
to be similar in appearance to the existing second story space and (2)
preliminary specifications for the components of the expansion work. Within two
business days following Lessor's receipt of the preliminary drawings and
specifications, Lessor shall provide to Lessee approval of such preliminary
drawings and specifications unless Lessor has a reasonable and material
objection thereto. Within 45 days following Lessor's approval of the preliminary
drawings and specifications, Lessee shall cause to be prepared and delivered to
Lessor (1) working plans which are sufficiently detailed in order to apply for
and obtain a building permit for the expansion work which shall be based upon
the preliminary drawings previously approved by Lessor and (2) final
specifications for the components to be installed in connection with the
expansion work which shall be based upon the preliminary specifications
previously approved by Lessor. Within two business days following Lessor's
receipt of the working plans and specifications, Lessor shall approve such plans
and specifications unless Lessor has a material and reasonable objection
thereto. Following Lessor's approval of the working plans and specifications,
Lessee shall submit the working plans and specifications to the Building
Inspection Department of the City of San Diego for the purpose of obtaining a
building permit for the construction of the work described in the working plans
and specifications (hereinafter "Lessor's Expansion Work"). If, during the
course of construction of Lessor's Expansion Work, either party determines that
it is necessary or desirable to make a material change to the working plans and
specifications, then such change shall first be submitted to the other party for
other party's review and approval, which shall not be unreasonably withheld or
delayed. Lessor's Expansion Work shall be accomplished by the same general
contractor hired by Lessee to
accomplish Lessee's Work, subject to the approval of Lessor's lender. Lessor
shall be responsible for payment of all expenses incurred in connection with
performing Lessor's Expansion Work including, but not limited to, preparation of
working plans and specifications. In the event that, for any reason beyond
Lessor's reasonable control, Lessor shall not be able to obtain a building
permit to accomplish Lessor's Expansion Work and/or a building permit is issued
but for less than the full amount of the proposed expansion, Lessee shall not
have any right to terminate this Lease and the only consequence to the parties
shall be that the Base Rent shall be adjusted as provided in Section 1.5.3 above
based upon the actual rentable floor area of the Building at the time of
Substantial Completion. Lessor has agreed to hire Lessee's general contractor
for the purpose of having a single contractor coordinate the accomplishment of
Lessee's Work and Lessor's Expansion Work. Lessor shall not be responsible for
any delays attributable to Lessee's contractor's failure properly to schedule
and coordinate the work; provided, however, delays caused by Lessor, including,
but not limited to, Lessor's failure timely to cooperate with the application
for a building permit, shall extend the Rent Commencement Date.
53. Delivery of Financial Statements. Within 30 days following Lessor's
request therefor, Lessee shall deliver to Lessor a copy of Lessee's most
recently prepared audited financial statement. Within 20 days following Lessor's
written request therefor, Lessee shall deliver to Lessor Lessee's most recently
prepared unaudited financial statement as maintained by Lessee for the period
commencing at the beginning of the then-current fiscal year. As used herein, the
term "financial statement" shall mean a detailed balance sheet and detailed
statement of income and expenses prepared in accordance with generally accepted
accounting principals and otherwise in the manner Lessee customarily prepares
such documents.
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54. Interpretation. Except as the context may otherwise, require,
references to "the Lease" or "this Lease" shall mean collectively (1) the
Standard Commercial/Industrial Single-Tenant Lease - Net dated June 13, 1997, by
and between Lessee and Lessor and all Exhibits attached thereto and (2) this
Addendum.
Lessor: Lessee:
LMC-Sorrento Investment Company, Agouron Pharmaceuticals, Inc.,
LLC, a California Limited a California Corporation
Liability Company
By /s/ Lee M. Chesnut By /s/ Glenn Zinser
----------------------------- ------------------------------
Lee M. Chesnut, Manager Print Name Glenn Zinser
Title VP, Operations
Schedule of Exhibits
1 - Subordination, Non-Disturbance and Attornment Agreement
2 - Site Plan
14
EXHIBIT 10.40
PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED (DESIGNATED BY AN
ASTERIX (*) AND WHITE SPACE) AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT DATED
AUGUST 21, 1997; FILE NO. 0-15609
VIRACEPT
(NELFINAVIR MESYLATE)
LICENSE AGREEMENT
BETWEEN
AGOURON PHARMACEUTICALS, INC. AND JAPAN TOBACCO INC.
AND
F. HOFFMANN-LA ROCHE LTD
June 30, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page No.
<S> <C>
BACKGROUND .........................................................................................1
ARTICLE I DEFINITIONS..............................................................................2
Section 1.01 Affiliate................................................................................2
Section 1.02 Agouron/JT Patent Rights.................................................................2
Section 1.03 Agouron/JT Technology....................................................................2
Section 1.04 Combination Product......................................................................2
Section 1.05 Compound.................................................................................3
Section 1.06 Control, Controlled or Controlling.......................................................3
Section 1.07 D&L Agreement............................................................................3
Section 1.08 Development Program......................................................................3
Section 1.09 Development Program Patent Rights........................................................3
Section 1.10 Development Program Technology...........................................................4
Section 1.11 Dossier..................................................................................4
Section 1.12 Effective Date...........................................................................4
Section 1.13 EMEA.....................................................................................4
Section 1.14 Field....................................................................................4
Section 1.15 Initial Commercial Sale..................................................................4
Section 1.16 Licensed Territory and Asian Licensed Territory..........................................4
Section 1.17 MAA......................................................................................5
Section 1.18 Major European Country...................................................................5
Section 1.19 Net Sales................................................................................5
(a) Adjusted Gross Sales..............................................................5
(b) Net Sales.........................................................................5
Section 1.20 Patent Rights............................................................................5
Section 1.21 Product..................................................................................5
Section 1.22 Registration.............................................................................5
Section 1.23 Roche Technology.........................................................................6
Section 1.24 Territory................................................................................6
Section 1.25 Trade Dress..............................................................................6
Section 1.26 Trademark(s).............................................................................6
ARTICLE II COMMERCIAL RIGHTS........................................................................6
Section 2.01 License Grants...........................................................................6
Section 2.02 Indications of the Compound and/or Products Outside of the Field.........................8
Section 2.03 Diligent Efforts to Market...............................................................8
Section 2.04 Discontinuance of the Development Program................................................9
i
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<S> <C>
Page No.
ARTICLE III SHARING AND PROTECTION OF INTELLECTUAL PROPERTY.........................................10
Section 3.01 Patents.................................................................................10
Section 3.02 Infringement of Patents of Third Parties................................................13
Section 3.03 Trademarks..............................................................................15
Section 3.04 Information Exchange....................................................................15
Section 3.05 Confidentiality.........................................................................16
Section 3.06 Publication.............................................................................17
ARTICLE IV MANAGEMENT STRUCTURE OF COLLABORATION...................................................18
Section 4.01 Coordination..............................................................................
Section 4.02 Development and Registration; Responsibility for Development Costs......................18
Section 4.03 Marketing...............................................................................20
Section 4.04 Supply of Product.......................................................................22
ARTICLE V LICENSE FEES AND ROYALTIES; GENERAL LICENSING TERMS 25
Section 5.01 License Fees and Royalties..............................................................25
Section 5.02 General Licensing Terms.................................................................28
Section 5.03 Foreign Currency........................................................................32
ARTICLE VI TERM AND TERMINATION....................................................................33
Section 6.01 Termination for Breach..................................................................33
Section 6.02 Termination by Roche....................................................................33
Section 6.03 Termination by Mutual Agreement.........................................................35
Section 6.04 Termination Upon Bankruptcy.............................................................35
Section 6.05 Disposition of Inventory................................................................35
Section 6.06 Effect of Termination...................................................................35
ARTICLE VII WARRANTIES, COVENANTS; INDEMNITIES; INSURANCE; DISPUTE RESOLUTION; GOVERNMENTAL
APPROVALS; EXPORT CONTROLS..............................................................36
Section 7.01 Warranties and Covenants................................................................36
Section 7.02 Indemnities; Insurance..................................................................36
Section 7.03 Dispute Resolution......................................................................38
Section 7.04 Governmental Approvals..................................................................39
Section 7.05 U.S. Export Controls....................................................................39
ARTICLE VIII DISCLOSURE OF AGREEMENT.................................................................39
Section 8.01 Disclosure of Agreement.................................................................39
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<S> <C>
ARTICLE IX GENERAL PROVISIONS......................................................................40
Section 9.01 No Implied Licenses.....................................................................40
Section 9.02 No Waiver...............................................................................40
Section 9.03 Severability; Government Acts...........................................................40
Section 9.04 Ambiguities.............................................................................40
Section 9.05 Notification of Authorities.............................................................40
Section 9.06 No Agency...............................................................................40
Section 9.07 Captions; Number; Official Language.....................................................41
Section 9.08 Force Majeure...........................................................................41
Section 9.09 Amendment...............................................................................41
Section 9.10 Applicable Law..........................................................................41
Section 9.11 Notices.................................................................................42
Section 9.12 Assignment..............................................................................42
Section 9.13 Succession..............................................................................42
APPENDICES
Schedule 1 Agouron/JT Patent Rights S1-1
Schedule 2 Asian Licensed Territory S2-1
Schedule 3 Nelfinavir Mesylate Clinical Studies S3-1
Results to be Contained in the MAA S3-1
Interim Results to be Contained in the MAA S3-2
Results to be Provided Later S3-3
Attachment 1 Trademark License A1-1
Attachment 2 Product Manufacturing Specifications A2-1
</TABLE>
iii
<PAGE>
This VIRACEPT(TM)1 (nelfinavir mesylate) License Agreement
("Agreement"), dated for reference purposes only this 30th day of June 1997, is
by and among Agouron Pharmaceuticals, Inc., a corporation duly organized and
existing under the laws of the state of California, having a principal place of
business at 10350 North Torrey Pines Road, La Jolla, California, United States
of America (hereinafter referred to as "Agouron"), Japan Tobacco Inc., a
corporation duly organized and existing under the laws of Japan, having its
principal place of business at JT Building, 2-1, Toranomon 2-chome, Minato-ku,
Tokyo, Japan (hereinafter referred to as "JT"), and F. Hoffmann-La Roche Ltd, a
corporation duly organized and existing under the laws of Switzerland, having
its principal place of business at CH-4002-Basel, Switzerland (hereinafter
referred to as "Roche"). Agouron, JT and Roche are each sometimes hereinafter
referred to as a party (collectively "parties") to this Agreement.
BACKGROUND
On December 1, 1994, Agouron and JT entered into a Development and
License Agreement ("D&L Agreement") under which they have collaborated in the
development and commercialization of the chemical compound known as "nelfinavir
mesylate" (sometimes referred to herein as "VIRACEPT") to treat and prevent
Human Immunodeficiency Virus infections.
On January 17, 1997, Agouron, JT and Roche entered into a Letter of
Intent ("LOI") pursuant to which Agouron and JT granted a license to Roche to
sell nelfinavir mesylate products to treat and prevent Human Immunodeficiency
Virus infections in certain countries of the world on terms substantially in
accordance with those contained in Exhibit A to the LOI ("Exhibit A"). While
Exhibit A states the basic terms of the understanding between the parties, the
parties agreed that the full license terms would be subject to further
negotiation and preparation of a further agreement containing the full terms of
the license between the parties. This Agreement is entered into for the purpose
of setting forth the definitive terms under which Roche is licensed to sell
nelfinavir mesylate products to treat and prevent Human Immunodeficiency Virus
infections in certain countries of the world.
NOW, THEREFORE, in consideration of the premises, and the mutual
covenants, benefits and obligations set forth herein, the parties agree as
follows:
- --------
1 VIRACEPT is a trademark of Agouron Pharmaceuticals, Inc., and is registered in
the United States and in certain other countries.
1
<PAGE>
ARTICLE I - DEFINITIONS
When used in this Agreement, each of the following terms shall have the
meanings set out in this Article I. All references to Articles, Attachments,
Sections and Schedules shall, except as otherwise explicitly provided, refer to
the Articles, Attachments, Sections and Schedules of this Agreement, all of
which are incorporated herein by reference.
Section 1.01 "Affiliate" means any person, organization or entity which
is, directly or indirectly, controlling, controlled by, or under common control
with Roche, Agouron or JT, as the case may be. The term "control" (including,
with correlative meaning, the terms "controlled by" and "under common control
with"), as used with respect to any person or entity, means the possession,
directly or indirectly, of the power to direct, or cause the direction of, the
management and policies of such person, organization or entity, whether through
the ownership of voting securities, or by contract or court order or otherwise.
The ownership of voting securities of a person, organization or entity shall
not, in and of itself, constitute "control" for purposes of this definition,
unless said ownership is of a majority of the outstanding securities entitled to
vote of such a person, organization or entity. For purposes of this Agreement,
Genentech, Inc. shall be considered to be an Affiliate of Roche, and the
government of Japan shall not be considered to be an Affiliate of JT.
Section 1.02 "Agouron/JT Patent Rights" means: *
Section 1.03 "Agouron/JT Technology" *
Section 1.04 "Combination Product" means *
2
<PAGE>
Section 1.05 "Compound" means the chemical compound known as
nelfinavir mesylate whose chemical name is as follows:
[3S-(3R*, 4aR*, 8aR*, 2'S*, 3'S*)]-2-[2'-hydroxy-3'-phenylthiomethyl-
4'-aza-5'-oxo-5'-(2"-methyl-3"-hydroxyphenyl)pentyl]-
decahydroisoquinoline-3-N-t-butyl carboxamide methanesulfonic acid
salt
and whose chemical structure is as follows:
[GRAPHIC OMITTED]
Section 1.06 "Control," "Controlled" or "Controlling" *
Section 1.07 "D&L Agreement" means the December 1, 1994
Development and License Agreement between Agouron and JT, as amended.
Section 1.08 "Development Program" *
Section 1.09 "Development Program Patent Rights" *
3
<PAGE>
Section 1.10 "Development Program Technology" *
Section 1.11 "Dossier" means the document which is filed with and
approved by a government or health authority for purposes of Registration, for
example, a Marketing Authorization Application.
Section 1.12 "Effective Date" means January 17, 1997.
Section 1.13 "EMEA" means the European Agency for the Evaluation of
Medicinal Products.
Section 1.14 "Field" means the treatment and prevention of Human
Immunodeficiency Virus ("HIV") infections.
Section 1.15 "Initial Commercial Sale" means the first commercial
sale of a Product in the Field *
Section 1.16 "Licensed Territory" and "Asian Licensed Territory" shall
have the following meanings:
4
<PAGE>
(a) "Licensed Territory" means all countries of the world (including
all countries included in the "Asian Licensed Territory" as defined below),
except for the United States (and its territories, possessions and protectorates
(including Puerto Rico), and the District of Columbia), Canada, Mexico, Japan
(other than those areas in Japan in which Roche is granted and accepts the
commercialization rights described in Schedule 2), South Korea and North Korea.
(b) "Asian Licensed Territory" means all the countries of Asia
listed on Schedule 2.
Section 1.17 "MAA" means Marketing Authorization Application
Section 1.18 "Major European Country" means *
Section 1.19 "Net Sales" and the related term "Adjusted Gross Sales"
shall have the following meanings:
(a) "Adjusted Gross Sales" means *
(b) "Net Sales" means *
Section 1.20 "Patent Rights" means, collectively, *
Section 1.21 "Product" means *
Section 1.22 "Registration" means the official approval by the
government or health authority in a country (or supra-national organizations,
such as the European Agency for the Evaluation of Medical Products) which is
required for a Product to be offered for sale in such country, including such
authorizations as may be required for the production, importation,
5
<PAGE>
pricing, reimbursement and sale of such Product, and for subsequent regulatory
filings for line extensions and/or additional indications of such Product.
Section 1.23 "Roche Technology" means *
Section 1.24 "Territory" means *
Section 1.25 "Trade Dress" means any materials supporting the
commercialization of a Product, including, but not limited to, packaging,
package inserts, advertising or selling aids, brochures, mailings and/or other
marketing or packaging materials.
Section 1.26 "Trademark(s)" means any trademark selected and owned by a
party and registered (or applied for) by such party, its Affiliate(s) and
sublicensee(s) in the Territory for use in connection with the marketing of
Products. The definition of Trademark(s) shall not refer to trade names used by
a party to designate the name of such party.
ARTICLE II - COMMERCIAL RIGHTS
Section 2.01 License Grants. To implement the commercialization of the
Compound and/or Products arising out of the Development Program, the parties,
subject to the other applicable obligations of this Agreement, grant and accept
the license rights provided below in this Article II.
(a) *
(b) *
6
<PAGE>
(c) *
(d) *
(e) *
(f) *
(g) *
(h) *
7
<PAGE>
(i) *
(j) *
Section 2.02 Indications of the Compound and/or Products Outside of the
Field.
(a) Subject to the provisions of the D&L Agreement, except as provided
in Section 2.02(b), Agouron and JT, in their sole discretion, shall be entitled
to make, use, develop and commercialize the Compound and/or Products for
indications outside of the Field in the Territory.
(b) *
Section 2.03 Diligent Efforts to Market. As provided below, the
right of Roche to market Products in the Field in a country located in the
Licensed Territory shall be subject to diligent marketing efforts by Roche. *
Roche, using diligent
marketing efforts, agrees to provide sales and other promotional support *
that is equivalent to or greater than that which Roche, its Affiliates
and/or sublicensees are then providing for saquinavir in such country. After
such * Roche shall provide a reasonable level of sales and other promotional
support for a Product in a country which, when measured as
8
<PAGE>
a percentage of Adjusted Gross Sales of such Product in such country, is
equivalent to or greater than that which Roche, its Affiliates and/or
sublicensees are then providing *
If, after * written
notice of the failure by Roche to provide the agreed upon level of sales
and other promotional support for a Product in a country located in the Licensed
Territory, Roche fails to fulfill its obligation under this Section 2.03,
Agouron and JT shall have the right, *
Section 2.04 Discontinuance of the Development Program.
(a) Roche shall, in a timely manner, use reasonable diligence in
the development and Registration of a Product in the Field in the countries of
the Licensed Territory. *
If, after *
written notice of the failure by Roche
to use reasonable diligence, in a timely manner, in the development and
Registration of a Product in the Field in a country located in the Licensed
Territory, Roche fails to fulfill its obligations under this Section 2.04(a),
such failure shall be deemed to be an election by Roche *
9
<PAGE>
(b) *
ARTICLE III - SHARING AND PROTECTION OF INTELLECTUAL PROPERTY
Section 3.01 Patents.
(a) *
10
<PAGE>
(i) *
(ii) *
(iii) *
(iv) Notwithstanding the preceding, *
11
<PAGE>
(b) The preparation, filing, prosecution, maintenance and extension of
patent applications and issued patents included within the Agouron/JT Patent
Rights shall be conducted in accordance with and governed by the provisions of
the D&L Agreement; provided, however, that an *
Ownership
of the Agouron/JT Patent Rights shall be determined in accordance with the
provisions of the D&L Agreement; provided, however, that the parties hereby
acknowledge that, in accordance with the provisions of *
(including expenses for
the preparation, filing, prosecution and maintenance of patent term restoration
applications and supplemental protection certificates, but excluding any travel
expenses of the parties, which shall be borne by the party incurring such
expenses).
(c) A representative of Roche and an authorized representative of
Agouron and JT shall *
to review and discuss the actions taken or to be taken by each of the parties
in protecting the commercial interests of the parties in Development Program
Patent Rights. Such meetings may be conducted in person or by means of telephone
conference calls. Each party shall pay its own costs of participating in such
meetings. Prior to or immediately after the filing of the initial patent
application for an invention, the filing party shall provide the authorized
representatives of the other parties with an English language version of the
patent application for the non-filing parties' review and comment. If requested
by a non-filing party, the filing party shall also provide such non-filing party
with a full copy of each patent application actually filed in English and in the
language in which it was originally filed. It is the intent of the parties that
any patent issuing to the parties hereunder shall be of the same quality and
scope that the party would have sought with respect to its other valuable
proprietary property not subject to this Agreement. Each of the parties shall
annually prepare a list which reflects, to the best of its knowledge, the
current status of any Development Program Patent Rights for which it controls
the preparation, filing, prosecution, maintenance and/or extension of the patent
applications and issued patents, which list shall be submitted to the other
parties within sixty (60) days after the end of the calendar year. An authorized
representative of Agouron and JT shall annually prepare a list which reflects,
to the best of their knowledge, the current status of the Agouron/JT Patent
Rights. For purposes of this Section 3.01, Agouron and JT shall be deemed to be
a single party. The parties, if they so elect, may mutually prepare a joint list
to satisfy the preceding obligations.
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(d) *
(e) *
(f) *
Section 3.02 Infringement of Patents of Third Parties.
(a) Each party, its Affiliates and sublicensees, and their respective
employees and agents shall use diligent efforts to avoid infringement of patents
of any third party in discovering, developing, manufacturing and commercializing
the Compound, intermediates thereof and/or Products. However, a party, its
Affiliates and sublicensees, and their respective employees and agents shall not
be liable to another party, its Affiliates and sublicensees, and their
respective employees and agents if the practice of the Patent Rights, Agouron/JT
Technology, Roche
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Technology, and/or Development Program Technology in discovering, developing,
manufacturing or commercializing the Compound, intermediates thereof and/or
Products infringe any patent of any third party. If a party becomes aware of any
claim or suit by any third party for infringement of a patent of such third
party in connection with the discovery, development, manufacture, use or sale of
the Compound, intermediates thereof and/or Products by a party hereto, such
party shall notify the other parties in writing of such claim or suit within
thirty (30) days thereafter. Each party agrees to render such reasonable
assistance as the other party(s) may request in defending any such claim or
suit. The parties shall mutually agree to any settlement of any existing or
potential infringement claim or action that would require the payment of any
royalty or lump sum payment to a third party, except that if the parties cannot
promptly reach agreement, they shall appoint an independent patent counsel to
give an opinion, which shall be binding on the parties, as to whether there is a
substantial risk that the third party patent is both valid and infringed. If the
opinion is that there is a substantial risk that the patent is both valid and
infringed, the marketing party of a Product in a country, after consultation
with the other parties, may settle the matter in its sole discretion on such
terms as it deems appropriate. If more than one party is participating in the
marketing of a Product in a country, the marketing parties shall mutually agree
to any settlement of any infringement claim or action that would require the
payment of any royalty or lump sum payment to a third party; if the parties are
unable to mutually agree on the settlement, then the issue shall be decided by
binding arbitration in accordance with the provisions of Section 7.03 hereof.
(b) *
The parties acknowledge that the manufacture and/or use
of certain materials or processes used in the manufacture of the Product *
(iii) that the provisions of this Section
3.02 do not apply to *
If royalties to third parties are due
because of the manufacture and/or use of certain materials or processes used in
the manufacture of the Product and such royalties are measured by Roche's Net
Sales of such Product, then such royalties shall not be payable by Roche prior
to the date of sale of such Product. The parties further specifically
acknowledge that license fees and/or royalties may be owed to third parties *
Notwithstanding the preceding, *
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which are then being commercially
used in the manufacture of the Product, the parties shall discuss in good
faith the sharing of such costs as provided above, versus changing the method of
manufacture of the Product.
Section 3.03 Trademarks. A party, its Affiliates and sublicensees,
if any, *
it is the intent
of the parties that a single Trademark be identified and developed for use in
connection with marketing of Products in the Field wherever possible throughout
the Territory. The parties acknowledge that, while Agouron has already selected,
filed and owns the VIRACEPT Trademark application and/or Trademark in certain
countries of the Territory, it is nevertheless their intention to use the
VIRACEPT Trademark in connection with the marketing of Products in the Field
wherever possible. If required by the laws of a specific country, the party
owning the Trademark shall assist the other party(s) in qualifying as a
registered user of such Trademark in such country. *
Additionally, the parties agree to cooperate with the other parties
in reasonable efforts to protect the rights of the parties in a Trademark,
including notification of any infringement which may come to a party's
attention, and the proper execution and filing of appropriate registered user
documents. *
Section 3.04 Information Exchange. *
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Section 3.05 Confidentiality. Except as otherwise expressly specified
in this Agreement and except for the proper exercise of any license rights
granted or rights reserved under this Agreement, Roche, Agouron and JT shall
each keep in confidence and shall each use its best efforts to cause its
respective Affiliates, employees, directors, agents, consultants, clinical
research associates, outside contractors, clinical investigators and
sublicensees to whom it is permitted to disclose information pursuant to the
terms of this Agreement to retain in confidence: (i) all confidential and
proprietary information of the other party, including *
and/or the marketing
and business plans of such other party that is disclosed to it hereunder; and
(ii) Development Program Technology. Without limiting the foregoing, Roche,
Agouron and JT shall each exercise the same degree of diligence and care with
respect to the above-described information as it exercises with respect to its
other proprietary information. Each party represents to the other parties that
it maintains policies and procedures designed to prevent the unauthorized
disclosure of its proprietary data and information. Roche further agrees that it
shall: (i) limit dissemination of and access to the confidential and proprietary
information of Agouron and JT within Roche's organization to those of Roche and
its Affiliates' personnel who have a need to know the information; and (ii) not
disclose such confidential and proprietary information to any employees of any
of its Affiliates if such Affiliate is doing business in a country not included
in the Licensed Territory, unless an authorized representative of Agouron and JT
specifically authorizes in writing such disclosure, and the employees of the
Affiliate receiving such information agree in writing not to disclose or use any
such information disclosed to them other than for the performance of this
Agreement and the proper exercise of any license rights granted to Roche.
Agouron and JT agree to limit dissemination of and access to confidential and
proprietary information of Roche concerning INVIRASE to Agouron and JT
personnel, and their respective Affiliates' personnel, who have a need to know
the information. Roche, Agouron and JT shall each be entitled to disclose the
above-described information to its consultants, clinical research associates,
outside contractors, collaborators, clinical investigators and other third
parties who are subject to confidentiality and use obligations equivalent to
those applicable to the disclosing party hereunder, and to governmental or other
regulatory and/or health authorities, to the extent that such disclosure is
reasonably necessary to obtain patents, to obtain authorization or to conduct
clinical trials on the Compound or Products, to prepare the Dossier, and/or
otherwise to fulfill its obligations pursuant to this Agreement. An authorized
representative of Agouron and JT shall be responsible, in its sole discretion,
for authorizing the supply of any drug samples of the Compound and/or Products
to third party researchers. Roche, Agouron and JT shall each have the right to
disclose Development Program Technology to persons it proposes to enter into
business relationships with, if such persons are subject to confidentiality
obligations equivalent to those applicable to the disclosing party hereunder.
The preceding obligations of confidentiality shall be waived as to information
which the party claiming waiver can demonstrate, based on written records: (i)
is in the public domain at the time of disclosure hereunder; (ii) comes into the
public domain through no fault of the party claiming waiver; (iii) was known to
the party claiming waiver prior to its disclosure under this Agreement, unless
such information was obtained from the other
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<PAGE>
party on a confidential basis; (iv) is disclosed on a non-confidential basis to
the party claiming waiver by a third party having a lawful right to make such
disclosure on a non-confidential basis; (v) is published with the prior mutual
agreement of the parties after having given consideration to appropriate
commercial factors; (vi) comes into the public domain through governmental
publication of a patent application; or (vii) is required to be disclosed to
file a patent or other regulatory application, or to comply with applicable laws
and regulations. The obligations under this Section 3.05 shall survive to the
later of: (i) * after the end of the Development Program; or
(ii) the termination or expiration date of the last to expire of any license(s)
granted pursuant to this Agreement, to the extent the Development Program
Technology, Agouron/JT Technology or Roche Technology is applicable to the
practice of grants under such license(s); or (iii) the expiration date of the
last to expire of any patent(s) within the Patent Rights on a Product.
Section 3.06 Publication. Agouron, JT and Roche each acknowledges the
interests of the other parties in publishing certain of their results of the
development and Registration of a Product to obtain recognition within the
scientific community and to advance the state of scientific knowledge. The
parties also recognize their mutual interests in obtaining valid patent
protection for their drug products. Consequently, a party, its employees or
consultants *
Furthermore, in acknowledgment that certain *
the parties agree that each party shall *
After
giving reasonable consideration to the suggestions of the
objecting party, the party wishing to *
Each
party will use its reasonable efforts to inform the other parties about proposed
oral presentations which such party intends to make, if it will be disclosing
new scientifically significant data concerning the Product at the oral
presentation.
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ARTICLE IV - MANAGEMENT STRUCTURE OF COLLABORATION
Section 4.01 Coordination. Coordination of the parties' development and
commercialization efforts for the Compound and Products in the Field in the
Licensed Territory shall be carried out as specified in Sections 4.02 and 4.03.
Section 4.02 Development and Registration; Responsibility for
Development Costs. Roche, Agouron and JT acknowledge their mutual intention to
cooperate in a commercially reasonable approach in the timely development of the
Compound and Products in the Field in the Licensed Territory. The parties
further acknowledge their mutual willingness to discuss ad hoc agreements to
establish appropriate mechanisms for such cooperation. Recognizing the
importance of timely initiation of development activities, however, Roche,
Agouron and JT agree to the following basic approach to development of Products
in the Field in the Licensed Territory, and to the conduct and funding of their
respective development activities.
(a) Except as otherwise agreed to by the parties, Agouron and JT shall
be responsible for completing, in a reasonable manner, and funding the studies
* these studies include the core development program studies
designed to achieve Registration of Products in the Field in the major countries
of the Licensed Territory. The parties acknowledge that Agouron and JT, despite
reasonable diligence, may be unable to complete *
(b) In collaboration with Roche, Agouron shall be responsible *
and
shall have the primary responsibility for the *
for the
ongoing correspondence and interaction concerning such Product with the
applicable regulatory authorities of the European Union. Roche shall be
responsible for negotiating pricing and reimbursement for a Product with the
regulatory authorities of the European Union.
(c) * shall be responsible for making in a timely manner
any alterations to the
* which are required for *
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<PAGE>
Except as otherwise agreed to by the
parties, Roche shall be responsible for *
(d) Roche shall be responsible for *
(other than those * ) which involve *
). Roche shall be responsible for the *
(e) Subject to the availability of adequate drug supply of Product,
Roche shall be responsible for the cost and implementation (possibly in
cooperation with a previously contracted contract research organization) of an
expanded access program for Products in appropriate countries of the Licensed
Territory, including specifically the countries located in Europe, Australia,
New Zealand and Brazil, which expanded access program shall be consistent in
scope with the expanded access program implemented by Agouron in North America.
Agouron and JT will reasonably consider Roche's request to conduct a portion of
the expanded access program as a program involving special license sales, if
such request does not interfere with the parties relationship with the HIV
community and/or government authorities and does not require a change in the
formulation (clinical versus commercial formulations) of drug product otherwise
allocated to the expanded access program.
(f) *
(g) Each party shall be entitled to have the government or health
authorities cross-reference information contained in any Dossier for a Product
filed in any country in the Territory, as may be necessary to obtain and
maintain the Registration on a Product in any other country in the Territory.
(h) Each party agrees to use its diligent efforts in responding in a
timely manner, but not more than thirty (30) days, to requests from the other
party for preclinical and clinical results and other information concerning the
Development Program to enable the other party to comply with regulatory
requirements for the Development Program. To the extent possible, the parties
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<PAGE>
shall develop and use compatible reporting forms in the clinical studies aimed
at achieving Registration of Products in the Field. A party conducting a study
involving the Product shall assist the other parties in the incorporation of the
data from such study into their Dossiers, if necessary.
(i) Roche shall keep Agouron and JT informed of its progress in the
development and Registration of Products. This shall include, * regular
meetings of the parties, and such written progress reports as are agreed to by
the parties which summarize Roche's activities during each reporting period and
Roche's planned activities for the succeeding period. The meeting locations of
the parties shall be at sites agreed to by the parties. Meeting minutes shall be
promptly prepared and approved by designated representatives of each of the
parties. Each party shall pay all of its respective expenses for such meetings.
Agouron and JT shall keep Roche informed of their development and Registration
activities to the extent that such development and Registration activities are
relevant to the development and Registration of Products by Roche in the
Licensed Territory. Each of the parties shall *
each
representative shall report to his/her management on the matters discussed at
each of the meetings of the parties. Each party, prior to its implementation
of a *
shall use its
reasonable efforts to provide the other parties with a copy of the *
manner, but not more than thirty (30) days, *
Roche agrees to use its
diligent efforts in responding in a timely manner, but not more than *
to requests from Agouron or JT for information *
(j) Roche, Agouron and JT shall each use qualified persons in the
development activities of the Development Program.
(k) All work in connection with the development of the Compound or
Products, to the extent required by applicable laws or regulations, shall be
conducted in accordance with Good Laboratory Practices, Good Manufacturing
Practices and Good Clinical Practices, as such rules of practice are amended
from time to time.
(l) If a party is conducting a study in a country located in another
party's marketing territory, the party conducting the study shall use its best
efforts to avoid interfering with such other party's activities in such country.
Section 4.03 Marketing. Roche shall be responsible for the marketing of
Products in the Field in the Licensed Territory. Roche, Agouron and JT agree to
the following basic approach to the marketing of Products in the Field in the
Licensed Territory and to the conduct of their respective marketing activities.
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<PAGE>
(a) *
Roche
shall modify the * only to the extent required to respond to
country-specific needs, and implement *
Agouron, JT and their licensees *
(b) Roche shall be responsible for distribution of a Product in any
countries located in the Licensed Territory where Roche is exclusively marketing
such Product in the Field.
(c) Roche shall keep Agouron and JT informed of Roche's *
This shall include, *
the regular meetings of the parties, and such written progress reports as
are agreed to by the parties which summarize Roche's activities during each
reporting period and Roche's planned activities for Products for the succeeding
period. The meeting locations of the parties shall be at sites agreed to by the
parties. Meeting minutes shall be promptly prepared and approved by the
designated representatives of each of the parties. Each of the parties shall pay
all of its respective expenses for such meetings. Each of the parties shall *
each representative shall report to his/her
management on the matters discussed at the meetings of the parties. At the
meetings of the parties, the representatives of the parties shall review and
discuss *
(d) It is the intent of the parties that the VIRACEPT Trademark be
identified and developed for use in connection with the marketing of Products in
the Field wherever possible throughout the Territory. Unless otherwise agreed
and as permitted by law, Roche agrees to market Products in the Field under the
VIRACEPT brand name in all countries in the Licensed Territory. The parties also
acknowledge their intention to use, if appropriate, the same Trade Dress in
connection with the marketing of Products in the Field wherever possible.
(e) In countries where Roche is exclusively marketing a Product in the
Field, unless prohibited by law or regulation, the labeling for such Product
shall state that the Product is licensed from Agouron and JT, and indicate that
the Product is a product of the joint development of Agouron, JT and Roche. To
the extent required to comply with the provisions of this Section 4.03(e), each
party grants to the other parties the right to use its name and logos in the
labeling for a Product.
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<PAGE>
(f) Roche shall use qualified persons in its marketing activities
for a Product in a country located in the Licensed Territory.
(g) Roche shall be responsible for responding, in a timely manner, to
inquiries and for reporting adverse drug reactions related to a Product in a
country located in the Licensed Territory after the Product is on the market in
the Field in such country. Notwithstanding Roche's ultimate responsibility for
the professional services and the health and/or regulatory authorities'
communications related to a Product after such Product is on the market in the
Field in a country located in the Licensed Territory, to the extent reasonably
possible, Agouron and JT shall have the right to review, comment and participate
in communications concerning such Product with the health and/or regulatory
authorities in such country. Furthermore, Roche, Agouron and JT shall each be
entitled to respond to routine medical questions or inquiries directed to them.
Each party shall use its best efforts to provide the other parties with all
information reasonably necessary to respond properly and promptly to any such
questions or inquiries; the parties shall also use their best efforts to keep
such information current. Without limiting the foregoing, Roche, Agouron and JT
*
The parties shall confer with respect to responding to anticipated inquiries and
questions. Each party shall use its best efforts to promptly provide the other
parties with new information, scientific findings, and summaries of regulatory
or judicial requests specifically related to a Product, to the extent that such
information, findings or requests are likely to have a significant impact on the
other parties' marketing of such Product.
Section 4.04 Supply of Product.
(a) Roche shall purchase from Agouron and/or JT, and Agouron and/or JT,
subject to the provisions of Section 4.04(c), shall use their reasonable efforts
to deliver, the finished dosage form(s) of Product *
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<PAGE>
(b) Roche shall purchase from Agouron and/or JT and Agouron and/or JT,
subject to the provisions of Section 4.04(c), shall use their reasonable efforts
to deliver, the finished dosage form(s) of Product, for sale in the Licensed
Territory, including special license sales, *
(c) Agouron and JT shall maintain books of account and complete
and accurate records of all of their *
(d) *
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<PAGE>
(e) Roche shall assist Agouron and JT in the identification of low-cost
manufacturing sources for a Product. Roche shall also provide without charge, to
the extent available, technical and manufacturing assistance and use of its
technology and proprietary information to Agouron and JT in an effort to
decrease the production costs of such Product.
(f) Agouron and JT agree to discuss in good faith with Roche an
arrangement under which Roche could be the manufacturer of a Product to be used
in the Licensed Territory, including the prerequisite requirement that *
(g) All Product is to be manufactured in accordance with the
specifications to be determined during development and later attached hereto in
Attachment 2 to this Agreement and any amendments thereto. All Product shall be
furnished with a certificate of analysis.
(h) Roche shall grant to both Agouron and JT a right of reference to
the drug master file for a Product in the countries where Roche, its Affiliates
or sublicensees are marketing such Product, and shall take all other steps as
may be reasonably requested by a manufacturer of such Product for the limited
purpose of enabling it to manufacture the Product for Roche, its Affiliates or
sublicensees. The manufacturer shall manufacture a Product in compliance with
the Dossier for such Product. Each party shall promptly and fully advise the
other parties of any changes, alterations or amendments to the drug master file
for a Product, or any amendments, instructions or specifications required by the
health or regulatory authority, and the parties shall confer with respect to the
best mode of compliance with any such requirements.
(i) In the event any Product delivered hereunder must be recalled
because of action by the relevant health authority, the parties shall cooperate
fully with each other in conducting such recall to the full extent necessary to
ensure that the recall is effective. Any recall expenses for such Product in a
country located in the Licensed Territory shall be the responsibility of the
party marketing the Product.
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<PAGE>
ARTICLE V - LICENSE FEES AND ROYALTIES;
GENERAL LICENSING TERMS
Section 5.01 License Fees and Royalties.
(a) In partial consideration for the rights granted to Roche by Agouron
and JT, Roche hereby agrees to make the following non-refundable license issue
fee payments directly to Agouron and JT.
USD (MM)
On January 24, 1997
To Agouron $ 9.0
To JT 9.0
Within ten (10) days of the execution of this
Agreement
To Agouron 2.0
To JT 2.0
Within thirty (30) days of first regulatory approval
in a Major European
Country or upon marketing authorization from the European
Commission
To Agouron 11.0
To JT 11.0
Within thirty (30) days of first regulatory approval
in a country located in the Asian Licensed Territory
or upon marketing authorization in a country located
in the Asian Licensed Territory
To Agouron 1.0
To JT 1.0
TOTAL 46.0
(b) In partial consideration for the rights granted each of the
parties in this Agreement, the parties agree as follows:
(i) Roche shall pay Agouron and JT directly, a royalty based
on the Net Sales of Product by Roche, its Affiliates and sublicensees,
consolidated into CHF, in amounts which equal the greater of: (A) the
royalty amounts calculated according to Royalty Schedule 1 below
(Product only); or (B) the royalty amounts calculated according to
Royalty Schedule 2 below (Product and any formulations of INVIRASE
which Roche markets, with royalties being calculated separately for the
consolidated annual Net Sales of such Product and INVIRASE). Royalty
Schedule 2 shall not apply to Net Sales (including special license
sales) in a country located in the Licensed Territory until the
Registration of a Product in such country. A sum equal to one-half
(1/2) of the following royalties shall be paid by Roche directly to
each of Agouron and JT.
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<PAGE>
Royalty Schedule 1
Royalty Rate Consolidated Annual Net Sales Level
Per Consolidated of the Product in Licensed Territory
Annual Net Sales Level (other than the Asian Licensed Territory)
* <= *
* > CHF * <= CHF *
* > CHF *
plus
Royalty Rate Consolidated Annual Net Sales Level of
Per Consolidated the Product in the Asian Licensed
Annual Net Sales Level Territory
* <= USD *
* > USD * <= USD *
* > USD *
Royalty Schedule 2
Consolidated Annual Net Sales Level for
the Product and INVIRASE in the Licensed
Territory, other than the Asian Licensed
Royalty Rate Territory (With Royalties Being Calculated
Per Consolidated Separately for the Consolidated Annual
Annual Net Sales Level Net Sales of the Product and INVIRASE)
* <= CHF *
* > CHF * <= CHF *
* > CHF *
plus
Consolidated Annual Net Sales Level for the
Product and INVIRASE in the Asian Licensed
Royalty Rate Territory (With Royalties Being Calculated
Per Consolidated Separately for the Consolidated Annual
Annual Net Sales Level Net Sales of the Product and INVIRASE)
* <= USD *
* > USD * <= USD *
* > USD *
(ii) If either: (A) regulatory approval for the first Product
is not obtained in a Major European Country prior to * or (B)
marketing authorization for the first Product is not obtained from
the European Commission prior to *
the royalty rate for Royalty Schedule 2 for the Licensed
Territory (other than the Asian Territory) shall be adjusted as
follows.
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<PAGE>
Royalty Schedule 2
Consolidated Annual Net Sales Level for
the Product and INVIRASE in the Licensed
Territory (other than the Asian Licensed
Royalty Rate Territory) (With Royalties Being Calculated
Per Consolidated Separately for the Consolidated Annual Net
Annual Net Sales Level Sales of the Product and INVIRASE)
* <= CHF *
* > CHF * <= CHF *
* > CHF *
(iii) If regulatory approval for the first Product is not
obtained in Thailand prior to * and Roche has used reasonable diligence
in the development and Registration of a Product in the Field in
Thailand (including Roche's filing of a regulatory approval application
in Thailand during * ), the royalty rate for Royalty Schedule 2 for the
Asian Licensed Territory shall be adjusted as follows.
Royalty Schedule 2
Consolidated Annual Net Sales Level for the
Product and INVIRASE in the Asian Licensed
Royalty Rate Territory (With Royalties Being Calculated
Per Consolidated Separately for the Consolidated Annual
Annual Net Sales Level Net Sales of the Product and INVIRASE)
* <= USD *
* > USD * <= USD *
* > USD *
(iv) If either: (A) regulatory approval for the first
Product is not obtained in a Major European Country prior to *
or (B) marketing authorization for the first Product is not obtained
from the European Commission prior to
* Royalty Schedule 2 for the Licensed Territory (other than the Asian
Licensed Territory) shall not apply and Roche shall be obligated to pay
JT and Agouron directly, royalties according to Royalty Schedule 1 only
for the Licensed Territory (other than the Asian Licensed Territory).
(v) If regulatory approval for the first Product is not
obtained in Thailand prior to * and Roche has used reasonable diligence
in the development and Registration of a Product in the Field in
Thailand (including Roche's filing of a regulatory approval application
in Thailand * Royalty Schedule 2 for the Asian Licensed Territory shall
not apply and Roche shall be obligated to pay JT and Agouron directly,
royalties according to Royalty Schedule 1 only for the Asian Licensed
Territory.
(vi) If Roche files a regulatory approval application in
Thailand after *
then the milestone *
and *
dates specified in subparagraphs (iii) and (v) above shall be
deferred by the number
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<PAGE>
of days such regulatory application is filed after *
provided, however, that the above-referenced milestone dates
shall not be deferred for any day(s) where such delay is caused by
reasons beyond Roche's control.
(vii) If Roche markets any other HIV protease inhibitors in
the Licensed Territory during the term of this Agreement, sales for
such product(s) shall be included in the consolidated Net Sales
calculation according to Royalty Schedule 2.
(viii) The annual period Consolidated Annual Net Sales Level
for calculating royalties on Net Sales shall be the calendar year;
provided, however, that Net Sales occurring during the partial calendar
year period commencing with the Initial Commercial Sale of Product in
the Licensed Territory, shall be calculated on an annualized twelve
(12) month basis ending December 31.
(ix) If Agouron and JT are unable to deliver to Roche
significant amounts of Product ordered by Roche for commercial sale
(other than special license sales) in the Licensed Territory during the
period ending on the first anniversary of the marketing authorization
for the first Product from the European Commission (or regulatory
approval for the first Product in a Major European Country) and such
Product was ordered by Roche in a timely manner in accordance with
forecasting and ordering procedures agreed upon by the parties, then
the parties will discuss in good faith an adjustment in the
implementation of Schedule 2. *
Section 5.02 General Licensing Terms.
(a) No sales shall be deemed to have occurred as the result of sales
between and among the parties, their Affiliates and sublicensees; it being
understood that sales occur when made to non-Affiliated third party purchasers.
A sale of a Product shall be deemed to have been made upon the earliest of
invoicing or delivery of such Product for value to a non-Affiliated third party
purchaser. In the case of a sale or other disposal of a Product for value other
than in an
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<PAGE>
arm's-length transaction exclusively for money, such as barter or counter-trade,
sales shall be calculated using the fair market value of such Product (if higher
than the stated sales price) in the country of disposal.
(b) *
(c) *
(d) In calculating royalties with respect to a Combination Product, the
parties shall enter into good faith negotiations regarding the percentage of the
Net Sales of such Combination Product to be used in calculating royalties
payable with respect to such Combination Product on a country-by-country basis.
If the parties are unable to agree upon such percentage, royalties with respect
to a Combination Product in a country *
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<PAGE>
(e) Royalties due on the sale of a Product shall be owed from the date
of Initial Commercial Sale (or, if earlier, the first special license sale) by a
party, its Affiliates or sublicensees of such Product in a country of the
Licensed Territory, until the latest of: *
(f) The parties agree that the accounting and payment of royalties
shall comply with the following terms and conditions:
(i) As soon as possible, but no later than *
Roche shall provide to the authorized
representative of Agouron and JT with its good faith estimate of the amount of
Net Sales for such calendar month.
(ii) On or before the *
of each and every calendar year for as long as royalties
are due following the commencement of the marketing of Products, Roche shall:
(A) *
(iii) Roche's accounting of royalty *
shall be reviewed and signed by an appropriate financial employee of Roche,
and shall identify all relevant details regarding *
(iv) Any royalty payments due that are not paid on or
before the date such payments are due shall bear interest at *
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<PAGE>
(g) Roche shall maintain and cause its Affiliates and sublicensees to
maintain books of account and complete and accurate records pertaining to the
sale or other disposition of Products and of the royalty and other amounts
payable under this Agreement in sufficient detail to permit the authorized
representative of Agouron and JT to confirm the correctness of such items. *
(h) Roche shall be entitled to withhold from a royalty or other payment
due Agouron and/or JT, the amount, if any, of any withholding tax assessable to
the party due the payment, provided evidence of payment of any such tax is
promptly provided to the party for which the tax is withheld. If any taxes
(other than value-added taxes) are imposed on payments of royalties to Agouron
and/or JT and are required to be withheld therefrom, such taxes shall be for the
account of Agouron and/or JT, respectively, and the payments due to the party
for which tax is withheld shall be reduced accordingly. Roche shall advise
Agouron and/or JT and provide them with copies of the tax receipts for all taxes
deducted from the payment of royalties due them.
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(i) The costs of defending or settling any claim or suit by any third
party for infringement of a patent of such third party by a party's practice of
the Patent Rights, Agouron/JT Technology, Roche Technology, and/or Development
Program Technology in discovering, developing, manufacturing or commercializing
the Compound, intermediates thereof and/or Products *
(j) Upon the expiration of the foregoing royalty obligations in a
country, which shall also be the expiration date of the licenses granted Roche
in such country pursuant to Sections 2.01(a) or 2.03, Roche *
intermediates thereof and Products in the
Field in such country on a non-exclusive basis; provided, however, that such
commercialization is subject to any other continuing obligations due Agouron and
JT, including license obligations under Section 2.01(j), if any.
(k) The parties agree in the future to use their reasonable efforts to
negotiate any additional licensing terms for the Compound, intermediates thereof
and/or Products which may be necessary to clarify the rights and obligations of
the parties.
Section 5.03 Foreign Currency.
(a) Development costs, Patent and Trademark costs, Adjusted Gross
Sales, Net Sales and any royalty amounts shall be stated in United States
dollars. Payments of development costs, Patent and Trademark costs and royalties
shall be made in United States dollars. Any required conversion of development
costs, Patent and Trademark costs, Adjusted Gross Sales, Net Sales and any
royalty amounts to United States dollars shall be done using the monthly average
rate of exchange for the calendar month in which such development costs, Patent
and Trademark costs, Adjusted Gross Sales, Net Sales and any royalty amounts
were incurred or first determined.
(b) The conversion from a foreign currency to United States
dollars shall be made by *
(c) *
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(d) *
ARTICLE VI - TERM AND TERMINATION
Section 6.01 Termination for Breach. Either party may, at its option,
terminate this Agreement for cause in the event the other party shall commit a
material breach of this Agreement (including the failure of Roche to make the
payments described in Section 5.01(a) in a timely manner) and shall fail to cure
such breach during the one hundred twenty (120) day period (thirty (30) day
period in the case of any payment default) following receipt of a written notice
of such breach from the non-breaching party. After the end of the applicable
cure period, the party who has the right of termination may exercise its
termination option by giving the breaching party prior written notice of at
least fifteen (15) days of its election to terminate. Any termination of this
Agreement shall not release the breaching party from any obligations incurred
hereunder, and the non-breaching party shall be entitled to pursue an action for
damages arising as a result of such material breach. For purposes of this
Article VI, Agouron and JT shall be deemed to be a single party; an authorized
representative of Agouron and JT shall be entitled to take any actions which
Agouron and/or JT are entitled to take pursuant to the provisions of this
Article VI.
Section 6.02 Termination by Roche.
(a) Roche may elect to cancel the development and Registration of a
Product in the Field in a country located in the Licensed Territory upon one
hundred eighty (180) days written notice. If Roche elects to terminate its
participation in the development and Registration of a Product in the Field in a
country located in the Licensed Territory, it shall use its best efforts to
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terminate its participation concurrently with the completion of its ongoing
clinical studies. In the event that Roche elects to discontinue the development
and Registration of a Product in the Field in a country located in the Licensed
Territory, subject to the provisions of the D&L Agreement, Agouron and JT, their
Affiliates and sublicensees shall be free, without any further action by
Agouron, JT or Roche, and without any further obligation to Roche and its
Affiliates, to continue to develop and/or commercialize Products in such country
on their own or with any third party, and to retain, use and disclose to any
such third party, information and materials which have been developed in the
development and Registration of the Product, provided that Agouron and JT shall
not disclose to such third party the confidential and proprietary information of
Roche (other than clinical, regulatory and manufacturing information and
materials specifically relating to such Product). In the event of the
discontinuation of Roche's development and Registration of a Product in the
Field in a country, the licenses granted to it by the provisions of Section 2.01
to use, offer for sale, sell and/or import in or into such country, such Product
in the Field under applicable Agouron/JT Patent Rights and Development Program
Patent Rights, and using applicable Agouron/JT Technology, Roche Technology and
Development Program Technology, shall be terminated, and Agouron and JT, their
Affiliates and sublicensees shall have no royalty or other obligations to Roche
and its Affiliates resulting from the manufacture, use, offer for sale, sale
and/or import in or into such country of the Compound, intermediates thereof
and/or Products by Agouron and JT, their Affiliates and sublicensees. Subject to
the provisions of the D&L Agreement: (i) Agouron and JT shall have the exclusive
right to Trademarks; (ii) Roche shall transfer ownership of any Dossiers for the
Product in such country to Agouron and JT; and (iii) Roche shall cooperate with
Agouron and JT to affect an orderly transition of Roche's development and
Registration responsibilities in such country to Agouron and JT. Roche shall be
responsible for the cost of its development activities in a country until the
effective date of such cancellation, including the expenses incurred in
terminating such activities and the costs of completing clinical studies which
were obligated to prior to its election to discontinue the development and
Registration of such Product in the Field in such country.
(b) Roche may elect to terminate its marketing rights for a Product on
a country-by-country basis upon one hundred eighty (180) days written notice. In
the event that Roche elects to terminate its marketing rights for a Product in a
country, subject to the provisions of the D&L Agreement: (i) the licenses
granted to Roche by the provisions of Section 2.01 to use, offer for sale, sell
and/or import in or into such country, such Product in the Field under
applicable Agouron/JT Patent Rights and Development Program Patent Rights, and
using applicable Agouron/JT Technology, Roche Technology and Development Program
Technology, shall be terminated, and Agouron and JT, their Affiliates and
sublicensees shall be free, without any further obligation to Roche and its
Affiliates, to market such Product in such country on its own or with any third
party; (ii) Agouron and JT, their Affiliates and sublicensees shall not have any
royalty or other obligations to Roche and its Affiliates resulting from the
manufacture, use, offer for sale, sale and/or import in or into such country of
the Compound, intermediates thereof and/or Products by Agouron and JT, their
Affiliates and sublicensees; (iii) Agouron and JT shall have the exclusive right
to Trademarks in such country; (iv) Roche shall transfer ownership to Agouron
and JT of any Dossiers for such Product in such country; and (v) Roche shall
cooperate
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with Agouron and JT to affect an orderly transition of Roche's marketing
responsibilities in such country to Agouron and JT.
(c) If there is a material breach of this Agreement by Agouron and JT
but Roche nevertheless wishes to retain its rights granted by the terms of this
Agreement in the Compound and/or Products arising out of the Development
Program, then Roche shall not be entitled to terminate this Agreement for cause,
but shall only be entitled to pursue an action for damages arising as a result
of such material breach.
Section 6.03 Termination by Mutual Agreement. The parties may
at any time terminate this Agreement, in part or in its entirety, by mutual
written agreement.
Section 6.04 Termination Upon Bankruptcy. In the event that a party is
subject to any proceeding under the bankruptcy laws, or to the appointment of a
receiver, trustee or liquidator of its business or substantially all of its
assets, and such proceeding, if involuntary, is not dismissed or discharged
within one hundred fifty (150) days after such proceeding is instituted, or upon
the liquidation, dissolution, or winding up of its business, then this
Agreement, at the election of the other party, shall be terminated in its
entirety for cause upon a notice in writing of at least fifteen (15) days from
the party who is not bankrupt or insolvent.
Section 6.05 Disposition of Inventory. In the event of the cancellation
or termination of any license rights with respect to a Product, inventory of
such Product may be sold for up to six (6) months after date of cancellation or
termination, provided required payments, if any, are paid thereon.
Section 6.06 Effect of Termination. The termination of this Agreement
shall, to the extent not otherwise expressly provided herein, have no affect on
the rights and obligations of the parties under this Agreement with respect to:
(i) the parties' obligations of confidentiality, indemnification and
compensation for services performed; (ii) a party's liability for failure to
fulfill its obligations or undertakings under this Agreement; and (iii) the
rights or obligations of the parties otherwise expressly stated in the Agreement
to survive the termination of this Agreement. If this Agreement is terminated,
Agouron and JT's obligations under Section 2.02(b) shall terminate. Any other
provisions of this Agreement which by their nature are intended to survive
termination shall also survive. Upon any termination of this Agreement in its
entirety because of a breach of a party, neither party waives any rights to any
remedies it may have arising out of the termination. In the event of any breach
by a party with respect to obligations which continue after a termination in its
entirety of this Agreement, the non-breaching party shall have all remedies
available to it, as if the Agreement were still in effect on the date of such
breach.
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ARTICLE VII - WARRANTIES AND COVENANTS; INDEMNITIES;
INSURANCE; DISPUTE RESOLUTION; GOVERNMENTAL APPROVALS; EXPORT CONTROLS
Section 7.01 Warranties and Covenants.
(a) Each party represents and warrants to the other parties that it has
the legal power, authority and right to enter into this Agreement and to perform
all of its respective obligations set forth herein, including the attachments
hereto.
(b) Agouron and JT each represents and warrants that, as of the date
this Agreement is executed, it was not aware of the existence of any patents
owned and Controlled by a third party covering the Compound which would
materially prevent the parties from commercializing the Compound in the Field in
the Licensed Territory. For purposes of this Section 7.01(b), the parties agree
that United States Patent No. 5,587,481 and United States Patent No. 4,439,613
and their foreign counterparts do not materially prevent the parties from
commercializing the Compound in the Field in the Licensed Territory.
(c) Each party covenants that it shall not commit any act or fail to
take any action which, in any significant way, would be in conflict with its
material obligations under this Agreement and the attachments hereto.
(d) Each party promises to comply in all material respects with the
terms of the licenses granted to it under this Agreement, and with all federal,
state, local and foreign laws, rules and regulations applicable to the
development, manufacture, distribution, import and export, and sale of
pharmaceutical products pursuant to this Agreement.
(e) EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, EACH OF
THE PARTIES MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OF ANY SUBJECT MATTER INCLUDED WITHIN THE
CLAIMS OF THE PATENT RIGHTS, INCLUDING THE COMPOUND. THE PARTIES UNDERSTAND AND
AGREE THAT DEVELOPMENT AND COMMERCIALIZATION OF THE COMPOUND AND/OR PRODUCTS
WILL INVOLVE APPROVAL BY REGULATORY AUTHORITIES, AND THAT NO PARTY IS
GUARANTEEING THE SAFETY OR EFFICACY OF THE COMPOUND AND/OR PRODUCTS, OR THAT THE
COMPOUND AND/OR PRODUCTS WILL RECEIVE THE REQUIRED APPROVALS.
Section 7.02 Indemnities; Insurance.
(a) Roche shall indemnify and hold harmless Agouron and JT, and their
Affiliates, employees, and agents (an "Agouron/JT Indemnified Party") from and
against any and all liabilities, losses, damages, costs, or expenses (including
reasonable investigative and attorneys' fees) which the Agouron/JT Indemnified
Party may incur, suffer or be required to pay resulting
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from or arising in connection with any product liability or other claims, other
than claims for patent infringement, arising from the use by any person of any
Product, to the extent such product liability or other claim results from the
negligent, reckless or intentional misconduct of Roche, its Affiliates or
sublicensees, or their respective employees and agents, or on account of Roche's
failure to fulfill its obligations or undertakings under this Agreement;
provided, however, that in no event shall Roche be liable to an Agouron/JT
Indemnified Party for any indirect, incidental, special or consequential
damages, including loss of revenues or profits from sales of Products.
(b) Agouron and JT shall indemnify and hold harmless Roche and its
Affiliates, employees, and agents (a "Roche Indemnified Party") from and against
any and all liabilities, losses, damages, costs, or expenses (including
reasonable investigative and attorneys' fees) which the Roche Indemnified Party
may incur, suffer or be required to pay, resulting from or arising in connection
with any product liability or other claims, other than claims for patent
infringement, arising from the use by any person of any Product, to the extent
such product liability or other claim results from the negligent, reckless or
intentional misconduct of Agouron and/or JT, their Affiliates or sublicensees,
or their respective employees and agents, or on account of Agouron or JT's
failure to fulfill its obligations or undertakings under this Agreement;
provided, however, that in no event shall Agouron or JT be liable to a Roche
Indemnified Party for any indirect, incidental, special or consequential
damages, including loss of revenues or profits from sales of Products.
(c) To the extent that a product liability or other claim, other than a
claim for patent infringement, results from the negligent, reckless or
intentional misconduct of more than one party, their Affiliates, sublicensees,
or their respective employees and agents, the parties agree to share in an
equitable manner such liabilities, losses, damages, costs, or expenses in
proportion to the relative fault of each of the parties, their Affiliates,
sublicensees, or their respective employees and agents.
(d) Unless the parties agree otherwise, all other liabilities, losses,
damages, costs, or expenses (including reasonable investigative and attorneys'
fees) under this Section 7.02 relating to or involving a Product in a country,
except as provided by the terms of Sections 7.02(a), (b) and (c), shall be the
responsibility of the party marketing such Product in such country. The party
marketing a Product in a country shall indemnify the non-marketing party in such
country from and against any and all liabilities, losses, damages, costs, or
expenses (including reasonable investigative and attorneys' fees) which such
non-marketing party may incur, suffer or be required to pay resulting from or
arising in connection with any product liability or other claims, other than
claims for patent infringement, arising from the use by any person of such
Product in such country. Section 3.02 sets forth the parties' liability
obligations arising from claims for patent infringement.
(e) The aforesaid obligations of the indemnifying party shall be
subject to the indemnified party fulfilling the following obligations:
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(i) The indemnified party shall fully cooperate with the
indemnifying party in the defense of any claims, actions, etc., which
defense shall be controlled by the indemnifying party.
(ii) The indemnified party shall not, except at its own cost,
voluntarily make any payment or incur any expense with respect to any
claim or suit without the prior written consent of the indemnifying
party, which consent such party shall not be required to give.
(iii) Promptly after receipt by the indemnified party of
notice of the commencement of any litigation or threat thereof which
may reasonably lead to a claim for indemnification, such party shall
notify the indemnifying party.
(f) The parties agree to maintain appropriate amounts of product
liability insurance coverage.
Section 7.03 Dispute Resolution. In the event of any controversy or
claim arising out of or relating to any provision of this Agreement or any term
or condition hereof, or the performance by a party of its obligations hereunder,
the parties shall try to settle their differences amicably between themselves.
If the representatives of the parties are unable to reach agreement on any such
issue, the issue shall be submitted for consideration, in the case of Roche, to
a designee of the Head of the Pharma Division of Roche and, in the case of
Agouron and JT, to one or more representatives jointly appointed by Agouron and
JT. If they are unable to agree, then the issue shall be resolved, in the case
of Roche, by the Head of the Pharma Division of Roche and, in the case of
Agouron and JT, by one or more representatives jointly appointed by Agouron and
JT. Any unresolved issues arising between the parties relating to, arising out
of, or in any way connected with this Agreement or any term or condition hereof,
or the performance by a party of its obligations hereunder, whether before or
after termination of this Agreement, except as otherwise provided in this
Agreement, shall be finally resolved by binding arbitration. Whenever a party
shall decide to institute arbitration proceedings, it shall give written notice
to that effect to the other party. The party giving such notice shall refrain
from instituting the arbitration proceedings for a period of sixty (60) days
following such notice. If Roche is the party initiating the arbitration, the
arbitration shall be held in San Diego, California, according to the rules of
the American Arbitration Association ("AAA"). If Agouron and JT, acting
collectively as a single party, is the party initiating the arbitration, the
arbitration shall be held in Newark, New Jersey, according to the rules of the
AAA. The arbitration shall be conducted by a single arbitrator mutually chosen
by the parties. If the parties can not agree upon a single arbitrator within
fifteen (15) days after the institution of the arbitration proceeding, then the
arbitration shall be conducted by a panel of three arbitrators appointed in
accordance with AAA rules; provided, however, that each party shall, within
thirty (30) days after the institution of the arbitration proceedings, appoint
one arbitrator with the third arbitrator being chosen by the other two
arbitrators. If only one party appoints an arbitrator, then such arbitrator
shall be entitled to act as the sole arbitrator to resolve the controversy. Any
arbitration hereunder shall be conducted in the English language, to the maximum
extent possible. All arbitrator(s) eligible to conduct the
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arbitration must agree to render their opinion(s) within thirty (30) days of the
final arbitration hearing. The arbitrator(s) shall have the authority to grant
injunctive relief and specific performance and to allocate between the parties
the costs of arbitration in such equitable manner as he determines; provided,
however, that each party shall bear its own costs and attorneys' and witness'
fees. Notwithstanding the terms of this Section 7.03, a party shall also have
the right to obtain, prior to the arbitrator(s) rendering the arbitration
decision, provisional remedies, including injunctive relief or specific
performance, from a court having jurisdiction thereof. The arbitrator(s) shall,
upon the request of either party, issue a written opinion of the findings of
fact and conclusions of law and shall deliver a copy to each of the parties.
Decisions of the arbitrator(s) shall be final and binding on all of the parties.
Judgment on the award so rendered may be entered in any court having
jurisdiction thereof.
Section 7.04 Governmental Approvals. Roche, Agouron and JT shall obtain
any government approval(s) required to enable this Agreement to become
effective, or to enable any payment hereunder to be made, or any other
obligation hereunder to be observed or performed. Each party shall keep the
other informed of its progress in obtaining any such government approval and
shall cooperate with the other party in any such efforts.
Section 7.05 U.S. Export Controls. The parties agree to comply with the
United States laws and regulations governing exports and re-exports of the
Compound, intermediates thereof, Products, Development Program Technology,
Agouron/JT Technology, Roche Technology, or any other technology or software
developed or disclosed as a result of this Agreement. The parties acknowledge
that any performance under this Agreement is subject to any restrictions which
may be imposed by the United States laws and regulations governing exports and
re-exports. Each party agrees to provide the other parties with any reasonable
assistance, including written assurances which may be required by a competent
governmental authority and by applicable laws and regulations as a precondition
for any disclosure of technology or software by the other party under the terms
of this Agreement. The obligations of this Section 7.05 shall survive
termination or expiration of this Agreement.
ARTICLE VIII - DISCLOSURE OF AGREEMENT
Section 8.01 Disclosure of Agreement. Except as agreed to by the
parties, neither Agouron, JT nor Roche shall release any information to any
third party with respect to any of the terms of this Agreement without the prior
written consent of the other parties, which consent shall not unreasonably be
withheld. This prohibition includes, but is not limited to, press releases,
educational and scientific conferences, promotional materials and discussions
with the media. If a party determines that it is required by law to release
information to any third party regarding the terms of this Agreement, it shall
notify the other parties of this fact prior to releasing the information. The
notice to the other parties shall include the text of the information proposed
for release. The other parties shall have the right to confer with the notifying
party regarding the necessity for the disclosure and the text of the information
proposed for release. Notwithstanding the preceding, Roche, Agouron and JT shall
each have the right to disclose the terms of this Agreement to persons it
proposes to enter into business relationships with, if such
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persons are subject to confidentiality and use obligations equivalent to those
applicable to the disclosing party hereunder.
ARTICLE IX - GENERAL PROVISIONS
Section 9.01 No Implied Licenses. Only the licenses granted pursuant to
the express terms of this Agreement shall be of any legal force and effect. No
license rights shall be created by implication or estoppel.
Section 9.02 No Waiver. Any failure by a party to enforce any right
which it may have hereunder in any instance shall not be deemed to waive any
right which it or the other parties may have in any other instance with respect
to any provision of this Agreement, including the provision which such party has
failed to enforce.
Section 9.03 Severability; Government Acts. In the event that any
provision of this Agreement is judicially, or by a competent authority,
determined to be unenforceable, in part or in whole, with regard to any or all
of the countries in the Territory, the remaining provisions or portions of this
Agreement shall be valid and binding to the fullest extent possible, and the
parties shall endeavor to negotiate additional terms, as feasible, in a timely
manner so as to fully effectuate the original intent of the parties, to the
extent possible, in the applicable countries. In the event that any act,
regulation, directive, or law of a country, including its departments, agencies
or courts should make impossible or prohibit, restrain, modify or limit any
material act or obligation of a party under this Agreement and, if any party to
this Agreement is materially adversely affected thereby, the parties shall
attempt in good faith to negotiate a lawful and enforceable modification to this
Agreement which substantially eliminates the material adverse effect; provided,
that, failing any agreement in that regard, the party who is materially
adversely affected shall have the right, at its option, to suspend or terminate
this Agreement as to such country.
Section 9.04 Ambiguities. Ambiguities, if any, in this Agreement shall
not be construed against any party, irrespective of which party may be deemed to
have authored the ambiguous provision.
Section 9.05 Notification of Authorities. After execution of this
Agreement, to the extent required by law, Agouron, after consultation with
Roche, shall notify the appropriate United States authorities about the terms of
this Agreement; JT, after consultation with Roche, shall notify the appropriate
Japanese authorities about the terms of this Agreement; and Roche, after
consultation with the authorized representative of Agouron and JT, shall notify
the appropriate European and other authorities about the terms of this
Agreement. The parties shall keep each other fully advised of the status and
progress of the notification procedures.
Section 9.06 No Agency. Agouron, JT and Roche shall have the status of
independent contractors under this Agreement and, except as otherwise explicitly
provided in this Agreement,
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nothing in this Agreement shall be construed as an authorization of a party to
act as an agent of another party.
Section 9.07 Captions; Number; Official Language. The captions of the
Articles and Sections of this Agreement are for general information and
reference only, and this Agreement shall not be construed by reference to such
captions. Where applicable in this Agreement, the singular includes the plural
and vice versa. To the extent appropriate, the meaning of terms whose first
letters are capitalized, but which are variations of terms that are defined
elsewhere in this Agreement, shall each have the same meaning as the defined
term. English shall be the official language of this Agreement and any license
agreement provided for hereunder, and all communications between the parties
hereto shall be conducted in that language.
Section 9.08 Force Majeure. A party shall not be responsible to the
other parties for any failure, delay or interruption in the performance of any
of its obligations under this Agreement if such failure, delay or interruption
is caused by any act of God, earthquake, fire, casualty, flood, war, epidemic,
riot, insurrection, or any act, exercise, assertion or requirement of a
governmental authority, or other cause beyond the reasonable control of the
party affected if the party affected shall have used its best efforts to avoid
such occurrence. If a party believes that the performance of any of its
obligations under this Agreement shall be delayed or interrupted as a result of
any of the reasons stated in this Section 9.08, and provided such party is able
to do so, such party shall promptly notify the other parties of such delay or
interruption and the cause therefor, and shall provide such other parties with
its estimate of when the performance of its obligations shall recommence. When
the party affected is able to recommence the performance of obligations delayed
or interrupted as a result of any of the reasons stated in this Section 9.08, it
shall so notify the other parties and, except as otherwise provided in this
Agreement, it shall promptly resume the performance of such obligations.
Section 9.09 Amendment. This Agreement, including the Attachments and
Schedules, constitutes the full agreement of the parties with respect to the
subject matter of this Agreement, and incorporates any prior discussions between
them with respect to such subject matter; provided, however, that the
Confidential Disclosure Agreements ("CDAs") between the parties dated January 7,
1997 and April 3, 1997 shall be deemed by the parties to supplement the
confidentiality provisions of this Agreement. In the event of any inconsistency
between this Agreement and the LOI, including Exhibit A thereto, and/or the
CDAs, the terms of this Agreement shall govern. This Agreement, including the
attachments hereto, shall not be amended, supplemented or otherwise modified,
except by an instrument in writing signed by duly authorized officers of the
parties. Except as otherwise explicitly provided in this Agreement, nothing in
this Agreement shall be deemed to amend the rights and obligations of Agouron
and JT under the D&L Agreement, or otherwise amend the provisions of the D&L
Agreement.
Section 9.10 Applicable Law. This Agreement shall be construed and the
rights of the parties shall be determined in accordance with the laws of the
United States and the State of California, without regard to its conflict of law
provisions.
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Section 9.11 Notices. Any notice required or permitted to be given
under this Agreement shall be in writing and shall be given in person, delivered
by recognized overnight delivery service, sent by mail (certified or registered
or air mail for addresses outside of the continental U.S.), or by telefax (or
other similar means of electronic communication), whose receipt is confirmed by
confirming telefax, and addressed, in the case of Agouron, to the Vice
President, Commercial Affairs (with a copy to the Legal Department), in the case
of JT, to the Vice President, Pharmaceutical Division (with a copy to the
International Legal Division) and, in the case of Roche, to the Head of
Strategic Marketing and Business Development of Pharma Division (with a copy to
the Legal Department), at the addresses shown at the beginning of this
Agreement, or such other person and/or address as may have been furnished in
writing to the notifying party in accordance with the provisions of this Section
9.11. Except as otherwise provided herein, any notice shall be deemed delivered
upon the earlier of: (i) actual receipt; (ii) two (2) business days after
delivery to such recognized overnight delivery service; (iii) five (5) business
days after deposit in the mail; or (iv) the date of receipt of the confirming
telefax.
Section 9.12 Assignment. This Agreement shall be assignable by Agouron
and/or JT, but shall not be assignable by Roche, except to an Affiliate, without
the prior written consent of both Agouron and JT, which consent may be withheld
at the sole discretion of Agouron or JT. Any such assignment without the prior
written consent of both Agouron and JT shall be void. If this Agreement is
assigned by Roche to an Affiliate, Roche shall still be responsible for all of
its obligations specified in this Agreement. Notwithstanding the preceding, in
the event of: (i) a sale or transfer of all or substantially all of Roche's
assets; or (ii) the merger or consolidation of Roche with another company, this
Agreement shall be assignable to the transferee or successor company.
Section 9.13 Succession. This Agreement shall be binding upon all
successors in interest, assigns, trustees and other legal representatives of
the parties.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in
triplicate originals, by their respective officers thereunto duly authorized, as
of the Effective Date.
AGOURON PHARMACEUTICALS, INC. JAPAN TOBACCO INC.
By: /s/ Gary Friedman By: /s/ Masakazu Kakei
Name: Gary Friedman Name: Masakazu Kakei
Title: Corporate V.P. & Title: Executive Director,
General Counsel Pharmaceuticals
By: /s/ R. Kent Snyder By: /s/ Y. Inubushi
Name: R. Kent Snyder Name: Y. Inubushi
Title: Senior V.P., Head of Title: Vice President, Pharm. Division
Commercial Affairs
F. HOFFMANN-LA ROCHE LTD
By: /s/ W. Henrich
Name: W. Henrich
Title: Director
By: /s/ S. Arnold
Name: S. Arnold
Title: Authorized Signatory
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SCHEDULE 1
AGOURON/JT PATENT RIGHTS
"Agouron/JT Patent Rights" collectively means:
1. *
(a) *
(b) *
2. *
(a) *
3. *
4. *
5. *
6. *
S1-1
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SCHEDULE 2
ASIAN LICENSED TERRITORY
"Asian Licensed Territory" means the following countries of Asia:
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Licenses in the above-listed countries shall be subject to compliance by Roche
with the United States laws and regulations governing exports and re-exports of
Product and any technology developed or disclosed as a result of this Agreement.
S2-1
<PAGE>
SCHEDULE 3
NELFINAVIR MESYLATE CLINICAL STUDIES
Results to be Contained in the MAA
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S3-1
<PAGE>
SCHEDULE 3
NELFINAVIR MESYLATE CLINICAL STUDIES (Continued)
Interim Results to be Contained in the MAA
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Protocol Title
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S3-2
<PAGE>
SCHEDULE 3
NELFINAVIR MESYLATE CLINICAL STUDIES (Continued)
Results to be Provided Later
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Protocol Title
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S3-3
<PAGE>
ATTACHMENT 1
TRADEMARK LICENSE AGREEMENT
This Trademark License, effective as of January 17, 1997, is between Agouron
Pharmaceuticals, Inc., a corporation duly organized and existing under the laws
of the state of California, having a principal place of business at 10350 North
Torrey Pines Road, La Jolla, California, United States of America (hereinafter
referred to as "Agouron"), Japan Tobacco Inc., a corporation duly organized and
existing under the laws of Japan, having a principal place of business at JT
Building, 2-1, Toranomon 2-chome, Minato-ku, Tokyo, Japan (hereinafter referred
to as "JT") and F. Hoffmann-La Roche Ltd, a corporation duly organized and
existing under the laws of Switzerland, having a principal place of business at
CH-4002-Basel, Switzerland (hereinafter referred to as "Roche"). Agouron, JT and
Roche are each sometimes hereinafter each referred to as a party (collectively
"parties") to this Trademark License.
(Terms containing an initial capitalized letter, except as explicitly otherwise
indicated, shall have the meanings stated in the VIRACEPT License Agreement, as
defined below.)
BACKGROUND
On December 1, 1994, Agouron and JT entered into a Development and License
Agreement under which they have collaborated in the development and
commercialization of the chemical compound known as "nelfinavir mesylate"
[3S-(3R*,4aR*, 8aR*, 2'S*,
3'S*)]-2-[2'-hydroxy-3'-phenylthiomethyl-4'-aza-5'-oxo-5'-
(2"-methyl-3"-hydroxyphenyl)pentyl]-decahydroisoquinoline-3-N-t-butyl
carboxamide methanesulfonic acid salt)
(sometimes referred to herein as "VIRACEPT") to treat and prevent Human
Immunodeficiency Virus ("HIV") infections.
On January 17, 1997, Agouron, JT and Roche entered into a VIRACEPT License
Agreement. The VIRACEPT License Agreement, as now or as subsequently amended, is
hereinafter referred to as the "VIRACEPT License Agreement."
Agouron and JT have granted a license to Roche to sell VIRACEPT products to
treat and prevent HIV infections in certain countries of the world pursuant to
the terms of a Letter of Intent entered into by the parties on January 17, 1997
and the VIRACEPT License Agreement.
The VIRACEPT License Agreement provides that a form trademark license shall be
agreed upon by the parties and attached to the VIRACEPT License Agreement as
Attachment 1. The VIRACEPT License Agreement also contains the following
provisions concerning ownership and utilization of Trademarks:
A1-1
<PAGE>
Section 1.26 "Trademark(s)" means any trademark selected and
owned by a party and registered (or applied for) by such party, its
Affiliate(s) and sublicensee(s) in the Territory for use in connection
with the marketing of Products. The definition of Trademark(s) shall
not refer to trade names used by a party to designate the name of such
party.
Section 2.01 License Grants. . . .
* * *
(j) *
Section 3.03 Trademarks. A party, its Affiliates and
sublicensees, if any, shall be free to use and to register in its own
name in any trademark office in the Territory any Trademark for use
with Products for which it holds license rights to make, use and/or
sell hereunder as it desires and in its sole discretion. Said party
shall own all right, title and interest in and to the Trademark in its
own name or that of its designated Affiliate or sublicensee, if any,
during and after the term of this Agreement. Notwithstanding the
preceding, *
Agouron and JT agree to share equally all
preparation, filing, prosecution and maintenance expenses in the
Licensed
A1-2
<PAGE>
Territory for the VIRACEPT Trademark which are payable to third
parties (excluding any travel expenses of the parties, which
shall be borne by the party incurring such expenses); each party shall
pay its share of such expenses within thirty (30) days from the date of
its receipt of a proper invoice for such expenses. The parties shall
not use a Trademark used in marketing of Products in the Licensed
Territory for marketing other commercial products in the Licensed
Territory. *
Each of the
parties shall annually prepare a list which reflects, to the best of
its knowledge, the current status of any Trademark which its owns.
Details regarding the license provisions of the Trademark license
granted in Section 2.01(j) hereof, including quality and specifications
of the Product, shall be agreed upon by the parties and later attached
hereto in Attachment 1 to this Agreement.
Section 4.03 Marketing. . . .
* * *
(d) It is the intent of the parties that the
VIRACEPT Trademark be identified and developed for use in connection
with the marketing of Products in the Field wherever possible
throughout the Territory. Unless otherwise agreed and as permitted by
law, Roche agrees to market Products in the Field under the VIRACEPT
brand name in all countries in the Licensed Territory. The parties also
acknowledge their intention to use, if appropriate, the same Trade
Dress in connection with the marketing of Products in the Field
wherever possible.
One or more of the parties is the owner(s) of the VIRACEPT Trademark, in certain
countries of the Territory.
The parties intend to use the VIRACEPT Trademark, including its associated
non-English translations (hereinafter collectively referred to as the "VIRACEPT
Trademark"), only in connection with the marketing of nelfinavir mesylate for
the treatment and prevention of HIV infections.
NOW THEREFORE, in accordance with the provisions of the VIRACEPT License
Agreement, for good and valuable consideration, the parties agree as follows:
A1-3
<PAGE>
TRADEMARK LICENSE
1. Under the provisions of the VIRACEPT License Agreement, as more
specifically set forth above, each party granted to the other party,
its Affiliates and sublicensees a non-exclusive right to use the
granting party's Trademark(s) in the Territory in the marketing of
VIRACEPT products.
2. Products marketed using the VIRACEPT Trademark shall be
manufactured strictly in accordance with applicable governmental
statutes, regulations or directives.
3. The licensed user of the VIRACEPT Trademark shall comply with all
applicable governmental statutes, regulations or directives.
4. The licensed user of the VIRACEPT Trademark shall not use the VIRACEPT
Trademark in a manner which is deceptive, or which would bring the
VIRACEPT Trademark, the Product or the other parties, into disrepute.
Each party shall use the VIRACEPT Trademark, including its associated
non-English translations, only in connection with the marketing of
Products for the treatment and prevention of HIV infections. *
5. Pursuant to the terms of the VIRACEPT License Agreement, Agouron, JT
and Roche shall share obligations and responsibilities related
to Trademark(s). Provided a party fulfills its obligations
and responsibilities related to Trademark(s), and subject to the terms
of the VIRACEPT License Agreement, *
6. Each party shall, upon learning thereof, promptly notify the other
party in writing of any infringement by a third party of the parties'
rights in the VIRACEPT Trademark, or of any claim or suit by a third
party that the use of the VIRACEPT Trademark infringes or otherwise
violates the rights of a third party. The parties shall cooperate in
taking commercially reasonable legal actions to protect the parties'
rights in the VIRACEPT Trademark and/or to contest a claim by a third
party that the use of the VIRACEPT Trademark infringes or otherwise
violates any rights of a third party. *
7. Only the licenses granted pursuant to the express terms of this
Trademark License and the VIRACEPT License Agreement shall be of any
legal force and effect. No license rights shall be created by
implication or estoppel.
A1-4
<PAGE>
8. This Trademark License shall terminate in accordance with the
provisions of the VIRACEPT License Agreement.
9. Any failure by a party to enforce any right which it may have hereunder
in any instance shall not be deemed to waive any right which it or the
other parties may have in any other instance with respect to any
provisions of this Trademark License, including the provision which
such party has failed to enforce.
10. In the event that any provision of this Trademark License is judicially
determined to be unenforceable, in whole or in part, the remaining
provisions or portions thereof shall be valid and binding to the
fullest extent possible, and the parties shall endeavor to negotiate
additional terms, as feasible, in a timely manner so as to fully
effectuate the original intent of the parties, to the extent possible.
Ambiguities, if any, in this Trademark License shall not be construed
against any party, irrespective of which party may be deemed to have
authored the ambiguous provision.
11. This Trademark License and the VIRACEPT License Agreement constitute
the full agreement of the parties with respect to the subject matter of
this Trademark License, and incorporate any prior discussions between
them with respect to such subject matter. This Trademark License shall
not be amended, supplemented or otherwise modified, except by an
instrument in writing signed by a duly authorized officer of each
party.
12. If there is a conflict between the terms of this Trademark License and
the VIRACEPT License Agreement, the terms of the VIRACEPT License
Agreement shall control.
13. This Trademark License shall be construed, and the rights of the
parties shall be determined, in accordance with the laws of the state
of California and the United States, without regard to conflict of law
provisions.
14. Any notice required or permitted to be given under this Trademark
License shall be in writing and shall be given in person, delivered by
recognized express delivery service, sent by mail (certified or
registered, or air mail for addresses outside of the continental U.S.),
or by telefax (or other similar means of electronic communication)
whose receipt is confirmed by confirming telefax, and addressed, in the
case of Agouron, to the Vice President, Commercial Affairs (with a copy
to the Legal Department), in the case of JT, to the Vice President,
Pharmaceutical Division (with a copy to the International Legal
Division) and, in the case of Roche, to the Head of the Pharma Division
(with a copy to the Legal Department) at the respective addresses shown
at the beginning of the VIRACEPT License Agreement, or such other
person and/or address as may have been furnished in writing to the
notifying party in accordance with the provisions of this paragraph.
Except as otherwise provided herein, any notice shall be deemed
delivered upon the earlier of: (i) actual receipt; (ii) two (2)
business days after delivery to a
A1-5
<PAGE>
recognized express delivery service; (iii) five (5) business days
after deposit in the mail; or (iv) the date of receipt of the
confirming telefax.
15. This Trademark License shall be binding upon all successors in
interest, assigns, trustees and other legal representatives of the
parties.
IN WITNESS WHEREOF, the parties hereto have executed this Trademark License, in
triplicate originals, by their respective officers thereunto duly authorized as
of the day and year hereinabove written.
AGOURON PHARMACEUTICALS, INC. JAPAN TOBACCO INC.
By: /s/ R. Kent Snyder By: /s/ Masakazu Kakei
Name: R. Kent Snyder, Sr. V.P. Name: Masakazu Kakei
Title:Head of Commercial Affairs Title:Executive Director Pharmaceuticals
By: /s/ Gary Friedman By: /s/ Tatsuya Yoneyama
Name: Gary Friedman Name: Tatsuya Yoneyama
Title:VP and General Counsel Title: Pharm Div. JT, Vice President
F. HOFFMANN-LA ROCHE LTD
By: /s/ W. Henrich
Name: W. Henrich
Title:Director
By: /s/ Stephan Arnold
Name: Stephan Arnold
Title:Authorized Signatory
A1-6
<PAGE>
ATTACHMENT 2
PRODUCT MANUFACTURING SPECIFICATIONS
THE TERMS OF THE PRODUCT MANUFACTURING SPECIFICATIONS WILL BE
CONTAINED IN THE APPLICABLE REGISTRATION FILING (S) FOR THE PRODUCT, AS AMENDED
A2-1
Exhibit 21
Subsidiary of Agouron Pharmaceuticals, Inc.
Subsidiary % State of
Corporation Owned Incorporation
------------------ ----- -------------
Alanex Corporation 100% Delaware
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-64415) of Agouron Pharmaceuticals, Inc. of our
report dated July 30, 1997 appearing on page F-1 of this Annual Report on Form
10-K.
/s/ PRICE WATERHOUSE LLP
San Diego, California
August 18, 1997
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial informtion extracted from the balance
sheet and the statement of operations and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000811210
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Jun-30-1997
<PERIOD-END> Jun-30-1997
<CASH> 52,484
<SECURITIES> 38,833
<RECEIVABLES> 31,435
<ALLOWANCES> 60
<INVENTORY> 58,800
<CURRENT-ASSETS> 184,201
<PP&E> 38,774
<DEPRECIATION> 16,161
<TOTAL-ASSETS> 266,914
<CURRENT-LIABILITIES> 68,415
<BONDS> 0
0
0
<COMMON> 317,133
<OTHER-SE> (125,851)
<TOTAL-LIABILITY-AND-EQUITY> 266,914
<SALES> 56,969
<TOTAL-REVENUES> 132,063
<CGS> 24,599
<TOTAL-COSTS> 115,995
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 142
<INCOME-PRETAX> (85,383)
<INCOME-TAX> 42,577
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (42,806)
<EPS-PRIMARY> (3.18)
<EPS-DILUTED> (3.18)
</TABLE>
Exhibit 99
Agouron Pharmaceuticals, Inc.
Important Factors Regarding
Forward-Looking Statements
The following factors, among others, could cause actual results to differ
materially from those contained in forward-looking statements made in this
report and presented elsewhere by management from time to time. Reference is
also made to the "Risk Factors" described in the Company's Prospectuses dated
July 26, 1996 and June 23, 1997.
Uncertainty of Product Development and Market Acceptance: The Company has
completed the development and commercialization of only one product and does not
expect to have any additional products commercially available until calendar
1999, if at all. There can be no assurance that further research and development
of these additional products will be successful or will result in drugs that
will qualify for approval by regulatory authorities for commercial sale or be
accepted and successful in the marketplace.
Uncertainty Associated with Clinical Testing: Historical results of clinical
testing of VIRACEPT(R), THYMITAQ(TM) and the Company's other clinical programs
are not necessarily predictive of future results. There can be no assurance that
clinical studies of products under development will demonstrate the safety and
efficacy of such products. The failure to adequately demonstrate the safety and
efficacy of a therapeutic product could delay or prevent regulatory approval of
the product. There can be no assurance that unacceptable toxicities or side
effects will not occur at any time in the course of human clinical trials or
commercial use of the Company's drugs. The appearance of any such unacceptable
toxicities or side effects could interrupt, limit, delay or abort the
development of any of the Company's drugs or, if previously approved,
necessitate their withdrawal from the market. Furthermore, there can be no
assurance that disease resistance will not limit the efficacy of VIRACEPT or
other of the Company's drugs, if any. Delays in planned patient enrollment in
the Company's current clinical trials or future clinical trials may result in
increased costs, program delays or both.
Future Profitability: While the Company has recently begun to generate
significant revenues from the commercialization of its first product and expects
to report ongoing operating profits on a quarterly basis, there can be no
assurance that the Company will achieve profitable operations or, if achieved,
maintain profitable operating results.
Additional Financing Requirements and Access to Capital: Additional funding may
be required for future capital expenditures, working capital and other general
corporate needs. No assurance can be given that additional financing will be
available when needed or on terms acceptable to the Company. If adequate funds
are not available, the Company may be required to delay or eliminate
expenditures for certain of its programs or activities or to license third
parties to commercialize products or technologies that the Company would
otherwise seek to develop and commercialize itself.
<PAGE>
Dependence on Others: The Company's strategy for development and
commercialization of certain of its products entails entering into various
arrangements with corporate partners, licensees and others. There can be no
assurance that any revenues or profits will be derived from such arrangements,
that any of the Company's current strategic arrangements will be continued, or
that the Company will be able to enter into future collaborations.
Manufacturing Capabilities: The Company is dependent on a number of contract
manufacturers for the commercial manufacture of VIRACEPT under current Good
Manufacturing Practices ("GMP"). Failure to meet GMP standards would have an
adverse impact on the Company's business. No assurance can be given that such
manufacturers can be retained or that such manufacturers will continue to timely
deliver sufficient product quantities at acceptable costs.
Sales and Marketing Capabilities: The Company has established its capabilities
in the sales, marketing and distribution of pharmaceutical products. There can
be no assurance that such capabilities will be sufficient or successful.
Patents and Proprietary Technology: No assurance can be given that the Company's
patent applications will issue as patents or that any patents that are or may be
issued will provide the Company with adequate protection for the covered
products or technology. Additionally, there can be no assurance that the
Company's confidentiality agreements will adequately protect its trade secrets,
know-how or other proprietary information. Further, there can be no assurance
that the Company's activities will not infringe on the patents or proprietary
rights of others or that the Company will be able to obtain licenses to any
technology that it may require to conduct its business or that, if obtainable,
such technology can be licensed at a reasonable cost.
Technological Change and Competition: There can be no assurance that competitors
will not succeed in developing technologies and products that are more effective
than any which have been or are being developed by the Company or which would
render the Company's technology and products obsolete and noncompetitive. Many
of the Company's competitors have substantially greater financial and technical
resources and production, marketing and development capabilities and experience
than the Company. Accordingly, certain of the Company's competitors may succeed
in obtaining regulatory approvals more rapidly or effectively than the Company
or enjoy greater manufacturing efficiencies and sales and marketing
capabilities, areas in which the Company has limited experience.
Volatility of Stock Price: The market price of the Common Stock has in recent
years fluctuated significantly, and it is likely that the price of Common Stock
will fluctuate in the future. Announcements by the Company or others regarding
its operating results, existing and future collaborations, results of clinical
trails, scientific discoveries, technological innovations, commercial products,
patents or proprietary rights or regulatory actions may have a significant
effect on the market price of the Common Stock. Fluctuations in financial
performance from period to period also may have a significant impact on the
market price of the Common Stock.
Government Regulation: Preclinical studies, clinical trials and the production
and marketing of the Company's products and its ongoing research and development
activities are subject to regulation by numerous governmental authorities in the
United States and other countries. If regulatory approval of a drug is obtained,
such approval may involve limitations and restrictions on the drug's use.
Failure of the Company to comply with applicable regulatory requirements can,
among other things, result in fines, suspension of regulatory approvals or
product recalls. Additionally, the Company is or may become subject to various
federal, state and local laws, regulations and recommendations relating to safe
working conditions and the use and disposal of hazardous or potentially
hazardous substances. The Company is unable to predict the extent of
restrictions that might arise from any governmental or administrative action.
Uncertainty of Third-Party Reimbursement and Product Pricing: The Company's
ability to commercialize products successfully will depend in part on the
availability of reimbursement of the costs of such products and related
treatments at acceptable levels from government authorities, private health
insurers and other organizations, such as health maintenance organizations.
There can be no assurance that reimbursement in the United States or foreign
countries will be available for any products the Company has developed or may
develop or, if available, will either remain available or will not be decreased
in the future, or that reimbursement amounts, if any, will not reduce the demand
for, or the price of, the Company's products, thereby adversely affecting the
Company's business.
Product Liability; Limited Insurance Coverage: The testing, marketing and sale
of human health care products entail an inherent risk of allegations of product
liability and there can be no assurance that product liability claims will not
be asserted against the Company. There can be no assurance that the Company will
be able to obtain or maintain product liability insurance on acceptable terms or
that such insurance will provide adequate coverage against any potential claims.
Use of Hazardous Materials: The Company's research and development activities
involve the controlled use of hazardous materials, chemicals, viruses and
various radioactive compounds. Although the Company believes that its safety
procedures for handling and disposing of such materials comply with the
standards prescribed by state and federal regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In
the event of such an accident, the Company could be held liable for any damages
that result and any liability could have an adverse effect on the Company.
Attraction and Retention of Personnel: The future success of the Company will
depend in large part on its ability to continue to attract and retain highly
qualified scientific, technical, sales and marketing and managerial personnel.
Competition for such personnel is intense and there can be no assurance that the
Company will be able to attract and retain the personnel necessary for the
ongoing development of its business. The loss of or failure to recruit such
personnel could have an adverse effect on the Company.
